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Why You Might Want to Get a Credit Card From a Small Bank or Credit Union | Credit Cards

Key Takeaways

  • Credit cards from small issuers may offer lower APRs and annual fees than products from large issuers.
  • Offerings may be simpler with straightforward cash back and limited fees.
  • Small issuers may lack expansive rewards and benefits but could help you limit credit card costs.

If you’re chasing maximum rewards and benefits, large credit card issuers, including American Express, Capital One, Discover and Chase, generally offer the best options. But if savings are a higher priority for you than earning, don’t overlook small credit card issuers.

A Consumer Financial Protection Bureau analysis finds that credit cards from small banks and credit unions may offer lower annual percentage rates and fees than cards from large issuers. These credit cards may fly under the radar but could offer good value and help you minimize costs.

Benefits of Small Bank Credit Cards

If you’re looking for a low-cost credit card, small issuers may have just what you need. The CFPB analysis shows that credit cards from small banks and credit unions may offer:

  • Lower interest rates than large credit card companies, including a lower maximum purchase APR.
  • Limited or lower annual fees than large issuers.

A lower credit card APR can save you hundreds, potentially thousands, per year. The CFPB analysis finds that the difference in reported purchase APR between large and small credit card issuers results in an average annual savings of $400 to $500 on an average balance of $5,000.

Another savings opportunity is in annual fees. According to the CFPB analysis, large-issuer credit cards were three times more likely to include an annual fee than small-issuer cards. Of the cards that had annual fees, the average fee amount for large issuers was about 70% higher than that of small issuers.

While the cost of using a card from a small bank or credit union may be lower, you might get some of the same perks you’d get from a card offered by a major issuer. JT Genter, editor in chief of rewards and travel tracking tool AwardWallet, says small-issuer cards are often on a major credit card network. These cards may access card tiers such as Visa Signature, which offers the same benefits whether the card is from a large or small issuer.

Small Bank and Credit Union Credit Cards to Consider

If you’re seeking simplicity and cost savings, these credit cards from small issuers are compelling options.

Alliant Cashback Visa® Signature Card

The Alliant Cashback Visa Signature Card from Alliant Credit Union offers potential savings with no annual fee and a low APR. There’s also no foreign transaction fee, and you can earn unlimited cash back rewards.

  • No annual fee, foreign transaction fee or over-limit fee.
  • 17.49% to 27.49% variable APR on purchases and balance transfers.
  • Alliant High-Rate Checking customers earn 2.5% cash back on the first $10,000 of qualifying purchases each statement period and 1.5% cash back on all other eligible purchases.
  • All other cardholders earn unlimited 1.5% cash back on all eligible purchases.

M&T Visa Credit Card

Though it doesn’t earn rewards, the M&T Visa Credit Card from M&T Bank can offer interest and fee savings. This card boasts a low variable APR and a 0% introductory APR on balance transfers and purchases for the first 12 months.

  • No annual fee.
  • 0% introductory APR on balance transfers and purchases for first 12 billing cycles.
  • 18.49% to 22.49% variable APR after introductory period.

Navy Federal nRewards® Secured Credit Card

A secured card, the Navy Federal nRewards Secured Credit Card from Navy Federal Credit Union requires a $200 security deposit but is light on fees, including no annual fee. It earns rewards and has a low 18% variable APR.

  • No annual fee, foreign transfer fee, balance transfer fee or cash advance fee.
  • At three months, your account will be reviewed for a higher credit line.
  • At six months, your account will be reviewed for an upgrade to an unsecured card.
  • Earns one point per dollar spent.
  • 18% variable APR on purchases and balance transfers.

Simmons Visa®

A simple credit card, the Simmons Visa from Simmons Bank has no annual fee, a low APR for purchases and a 0% introductory APR for 12 months on balance transfers completed within 60 days of opening an account. It also has cardholder benefits including travel accident insurance and car rental coverage.

  • No annual fee, though there is a foreign transaction fee.
  • 0% introductory APR for 12 billing cycles on balance transfers completed within 60 days of opening an account.
  • 15.5% to 23.5% variable APR on purchases, and on balance transfers after the introductory period.
  • Offers car rental coverage and up to $1 million in travel accident insurance.

Citizens Cash Back Plus World Mastercard

You can earn 1.8% cash back on all purchases with the Citizens Cash Back Plus™ World Mastercard® from Citizens Bank. This card also offers savings with no annual fee, no foreign transaction fee, no penalty APR and a 0% introductory APR on balance transfers for the first 15 billing cycles.

  • No annual fee, foreign transaction fee or penalty APR.
  • Offers a 0% introductory APR on balance transfers for the first 15 billing cycles.
  • Earns 1.8% cash back on everything you buy, or 1.9% cash back if you have a Citizens Quest Checking Account.

What to Look for in a Credit Card

As you consider credit cards from any issuer, large or small, understand how these factors align with your financial needs and preferences.

  • APR. This is how much you’ll pay in interest if you carry a balance.
  • 0% introductory APR offers. These can save you on interest charges if you need to carry a balance or do a balance transfer from another credit card.
  • Fees. These include annual fees, late payment fees and foreign transaction fees.
  • Rewards. These are essentially rebates on your spending that can put value back in your pocket.
  • Other benefits. These perks can make travel or other aspects of your life easier, such as rental car insurance or extended warranty coverage.
  • Credit score requirements. These can help you determine whether your credit is good enough to qualify for a particular credit card.
  • Credit limit. This is the amount of revolving credit made available to you, or how much you can charge on the card.
  • Customer service reviews. These can tell you what other consumers have experienced with the credit card issuer.

Small bank and credit union cards may offer an interest-savings advantage. However, “interest rate only matters if you’re planning on carrying a balance,” says Genter.

Chip Chinery, personal finance blogger at Chip’s Money Tips, says interest doesn’t factor into his credit card choices at all. “I don’t care what the interest rate is because I will never charge something without having the cash to pay it off in full.” Instead, he focuses on the perks, such as cash back and other rewards he earns for using a card.

Genter encourages card shoppers to not take benefits for granted. While he points out that zero fraud liability and online payments are standard for credit cards, benefits such as purchase protection can offer savings if you buy something and it breaks quickly.

Sarah Goldberg
Sarah Goldberg

Sarah is a seasoned financial market expert with a decade of experience. She's known for her analytical skills, attention to detail, and ability to communicate complex financial concepts. She holds a Bachelor's degree in Finance, is a licensed financial advisor, and enjoys reading and traveling in her free time.

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