Low-income community credit unions: How cards and rewards compare

Living in a low income community comes with a lot of financial stress. Many who live in these areas find themselves living paycheck to paycheck, while having to work multiple jobs to make ends meet. As a result, there’s little room to put a sound financial health plan in place for the future.

Under these circumstances, it’s understandable why a credit card would seem to be out of reach. Luckily, credit unions with low income designations can offer financial tools and services to underserved communities.

If you’re looking for a credit card and live in a low income area, credit union credit cards might be a good option. 

What are credit unions for low income communities?

The National Credit Union Administration – the federal agency governing credit unions – offers a low income designation. Credit unions serving low income areas can apply for the designation if 50.01% or more of the members are considered low income earners. The NCUA uses US Census Bureau data to determine if members meet the income thresholds for the designation.

The benefits for credit unions to be designated as low income include:

• More access to capital for small business lending
• Access to grants and low-interest loans from the Community Development Revolving Loan Fund
• Accept deposits from non-members from any source
• Access to supplemental capital

Credit unions that receive the low income designation are able to use the benefits from the NCAU to help promote financial wellness in the community. Many low income areas suffer from lack of financial resources and education. The low income designation makes it easier for a credit union to provide the tools and services low income members need.

There are several ways having a low income designation can help a credit union better serve its community, including:

• Providing access to accounts with low minimum balances
• Awarding loans with small dollar amounts
• Providing small business loans in small dollar amounts
• Offering loans and credit union credit cards to help members with limited or poor credit history build credit
• Creating access to financial services like financial counseling or education courses for members

Credit card options for low-income community members

Having a low-income doesn’t mean you’re not qualified for a good credit card. In fact, there are many low-income earners with excellent credit. Having a good credit score is a major factor in getting approved for a credit card. Even with a low credit score or limited credit history, you may still be able to get a credit card that works for you.

There are several options for low-income community members to get a credit card:

• Cashback or rewards cards with limited fees
• Cards with no annual fees
• Secured cards
• Union bank credit card

Getting a credit card from a low-income credit union has advantages and disadvantages. Here are some reasons to get a credit union credit card:

• Generally lower interest rates and fees
• Low cost or no-fee balance transfers

On the other hand, getting a credit card from your credit union may not be the best choice. Disadvantages to a credit card from a credit union include:

• Membership and credit union account requirements
• Generally more difficult to be approved with poor credit

A credit card from a national bank or credit card provider may be easier to obtain than one from a credit union. Most credit card providers have card options for low-income earners or people with limited credit history. Below are two credit cards that may work for you if you decide a credit union credit card isn’t right for you:

Capital One Platinum Credit Card

The Platinum Credit Card from Capital One is designed to give you a higher credit limit automatically. As long as you make your first 5 payments on time, the credit limit on your card will increase. The card also features a $0 annual fee, so you won’t be spending hard-earned money to have the credit card. You’ll also get access to your credit score from Capital One’s CreditWise® program.

Discover it® Secured

A secured credit card is great for low-income earners or anyone with limited or poor credit history. You make a cash deposit when you open the card. The amount of your deposit is your credit limit. The Discover it Secured card has no annual fee and allows you to build your credit history. You get to choose your credit limit up to the amount you’re approved by making a refundable deposit. You’ll get 2% cash back on purchases at gas stations and restaurants (up to the first $1,000 per quarter, then 1%). Discover will even match the cash back you earned at the end of your first year.

Low-income community credit unions in the United States

If you’re living in a low-income area, you may be able to join a low-income community credit union. Use the chart below to find a credit union with low-income designation near you.

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Talk with a customer service representative from your local low-income credit union to find out what type of credit cards they offer. Be sure to ask the following questions about credit cards from the credit union:

• What are the eligibility requirements?
• What are the annual fee and interest rate?
• How much are credit union member fees?
• Do I need a certain type of account to apply for a union bank credit card?
• Do your credit cards offer rewards?

In a nutshell

Low-income community credit unions make it easier to get the tools you need to build credit and set financial goals. Find the nearest low-income credit union near you to see if you can become a member. You’ll get the benefits of expanded credit building tools, such as small-dollar loans.

Finding a credit card as a low-income earner can be difficult. However, there are plenty of options for low-income communities. Low-income credit unions often offer credit cards as well as national credit card providers. These options make it possible to get a credit card that works for you and may even provide perks like cashback.