What's the difference between a credit union and a bank?

Credit unions offer pretty much the same products and services to conventional banks, including transaction accounts, home loans and credit cards.

But while standard banks are owned by shareholders and focus on generating profits, credit unions are often run by members and focus on providing benefits to customers. This means the profits made by credit unions are usually passed on in the form of more competitive rates and fees.

What kind of credit union credit cards are available?

Credit union credit cards often focus on providing potential savings and ongoing value for members. As a result, the credit cards available tend to have lower ongoing interest rates and annual fees than those provided by larger financial institutions. They may also come with extras such as rewards programs or complimentary travel insurance and other perks.

To get a credit union credit card, you need to become a member of the credit union, which usually involves a fee of around $5 to $10. You may also need to open an everyday transaction account before or during your application for a credit union credit card.

Once you’re a member, you also have the opportunity to influence how the credit union is run. For example, you may be able to vote at annual general meetings or provide feedback that influences the features of different products.

In comparison, banks and larger financial institutions operate more like conventional businesses. This means they often provide more competitive introductory offers than credit unions. For example, balance transfer credit cards from banks typically provide lower introductory interest rates and longer promotional periods in comparison to credit union credit cards.

Banks also tend to provide more comprehensive rewards programs and complimentary extras than credit unions. When it comes to applying for a bank credit card, you don’t need to become a member or open a transaction account. However, this means you don’t have a say in how the bank is run or how different products work.

What about building societies and mutual banks?

Like credit unions, a building society or mutual bank is a member-owned financial institution with a focus on providing value to members.

The credit cards and other products provided by building societies are very similar to those offered by credit unions. As a result of these similarities, credit unions and building societies are often put in the same category.

What’s right for me? Credit unions or banks?

How to compare credit union credit cards

If you’re interested in getting a credit union credit card, include the following factors in your comparison to find the right option for you:

• Standard interest rates. Credit union credit cards tend to have lower standard purchase rates than bank options. Some credit union cards also apply the same interest rate to both purchases and cash advances (rather than having a separate and higher cash advance rate).
• Promotional interest rates. As credit union credit cards typically offer low ongoing interest rates, the promotional rate offers may be more conservative. If you want to get a credit card with a low introductory interest rate for balance transfers or 0% on purchases, make sure you compare both credit union and bank options to find one that offers both introductory and ongoing features that will work for you.
• Balance transfers. Some credit union credit cards don’t offer balance transfers. The cards that do provide this service are less likely to have a 0% interest rate during the introductory period when compared to cards from banks. However, credit union credit cards usually have a lower ongoing interest rate than credit card revert rates. So if you're unable to repay your balance by the end of the promotional period, make sure you consider whether you're better off going with a 0% promotion with a higher revert rate or a low ongoing rate.
• Annual fees. Most credit union credit cards have low annual fees (i.e. under $100).There are also some credit union credit cards that don’t charge an annual fee. Some credit cards also have low or $0 annual fees, so you need to weigh up whether the features of the card justify these costs.
• Interest free days. If you pay your balance in full by the statement due date each month, you could get up to a certain number of interest free days for each statement period. This feature is available with both credit union and bank credit cards.
• Rewards. Credit unions offer fewer rewards credit cards than banks. There are still a few options that offer points for purchases made on the account, though, including some cards that are linked to frequent flyer programs. For example, the Visa Platinum credit card from Qudos Bank (formerly Qantas Credit Union) offers 1 Qantas Point per $1 spent on most purchases, and 0.5 points per $1 for Qantas purchases.
• Other fees. Like banks, credit unions may apply other fees for a range of credit card transactions and services. The most common include international transaction charges, late payment fees and cash advance fees. Always check the product details for information on what fees may apply so you can factor them into your comparison.
• Membership requirements. You need to sign up as a member before you can apply for a credit union credit card. In some cases, you can request membership when you apply for a credit card but you may have to apply separately and wait for your membership to be approved before you can get a card.
• Complimentary extras. In general, only gold or platinum credit union credit cards will offer complimentary extras such as travel insurance or concierge services.
• Branch access. Credit unions may have a more limited branch network when compared to larger financial institutions. Before you apply for a credit card from a credit union, you should check out the existing branch network and other access options to decide if it will work for you.

Pros and cons of credit union credit cards

Other factors to consider

• Community support. As well as being focused on benefitting members, credit unions usually have a community focus. For example, they may provide funding for local community groups and schools, encourage arts and performance, and work on building stronger human bonds.
• Industry-based options. Some credit unions limit membership to people in specific industries. For example, Teachers Mutual Bank primarily offers membership to retired and current teachers, university students studying to become teachers and other employees in the education sector.

As a result of all these credit union features, people often pay as much attention to a credit union’s philosophy as they do to specific products and features. This level of involvement means that credit unions often suit people who want to completely change the way they bank.

If you’re looking for a card that offers short-term value, on the other hand, you may find that bigger financial institutions provide you with more options. But either way, it can be worth comparing credit cards from both credit unions and banks to see which option is most suited to your needs.

Frequently asked questions

Can I apply for a credit union credit card online?

This depends on the credit union you wish to deal with, and you can find a number of credit unions that accept online applications for credit cards.

What eligibility criteria would I have to meet to apply for a credit union credit card?

The eligibility criteria for credit cards can vary, but generally includes the following:

• You must be at least 18 years of age to apply for a credit card in Australia
• You must be a citizen or permanent resident of Australia
• You must have a good credit history
• You must meet the membership requirements of the credit union

For specific information on application requirements, refer to the product page of any credit union credit card you’re interested in. You may also want to visit a specific credit union’s website for more details.

Is there a credit union in Australia with branches in all states and territories?

Most credit unions have small branch networks in comparison to banks. But some may allow you to bank in partner branches, or offer other services. Refer to individual credit union websites for details of their branch networks and access options.

Are credit unions regulated in the same way as banks?

Yes, both credit unions and building societies are accountable under the same regulations and laws as banks in Australia. All credit unions must have an Australian Financial Services Licence (AFSL) to be able to provide financial services and products. The Australian Prudential Regulation Authority (APRA) monitors the functioning of both credit unions and banks.