Protection against negative changes. Of course, many abusive practices, such as arbitrary rate hikes on existing balances, will be reined in once the Credit CARD Act takes effect Feb. 22, 2010. Until then, consumers are vulnerable to changes, such as rate and fee hikes.
Credit union credit cardholders are less likely to see wild changes to their credit card accounts. "We're not here to pull any tricks, because our owners are our members," says Judy Tharp, president and CEO of Piedmont Advantage Credit Union in Winston-Salem, N.C.
"Although they do have to make enough money to cover their expenses, put away reserves and all that sort of thing, they're not there to make as much money as they possibly can off that program," says Pat Keefe, spokesman for the Credit Union National Association, or CUNA, a nonprofit trade group based in Washington, D.C., and Madison, Wis.
Keefe says one change credit union cardholders could see as a result of the CARD Act is their fixed rate changing to a variable rate. The CARD Act has tighter restrictions on fixed-rate products. For instance, it imposes a rate freeze on new accounts for the first year, but lets variable-rate cards fluctuate with a market index. As of July, 64 percent of credit union cards offered a fixed rate on purchases.
ConsMore hassle to get a card. You have to become a member of a credit union before you can apply for one of its credit cards.
You can't join just any credit union. "Credit unions are defined by their field of membership. You have to belong to some qualifying group," says Keefe. Credit unions may restrict membership to particular communities, employers or organizations. For example, Navy Federal Credit Union serves Department of Defense members and their families.
To see which credit unions you're eligible for, use your connections. Check with your employer. Ask relatives if they have a credit union they use because you may be able to join as a family member. Check with any groups or associations to which you belong.
Shop around online. Bankrate.com has several credit union listings, but you should also try Findacreditunion.com or the credit union locator from CUNA.
Before you apply, make sure the credit union actually has a credit card program. According to CUNA, just 53 percent of credit unions offer credit cards.
To join you have to buy what's known as a "par value" share in the credit union. "The credit union, being a cooperative, our members are considered shareholders," says Tharp. She says the value of the share typically ranges from $5 to $25, and the one-time deposit makes you a lifetime member with access to all the products and services.