Credit card companies aren’t making many friends these days. In an effort to shore up their business, maximize their profits and grab as much coin as they can before the February 2010 implementation of CARD Act restrictions, the big boys of the credit card industry have been cutting folks off, jacking up rates and generally doing just about everything you can imagine to irritate their customers.

New research from the Pew Charitable Trust indicates that virtually NONE of the cards currently offered by the well-known companies would be acceptable if we were living under the upcoming regulatory framework today. It’s enough to make you look for an alternative, isn’t it?

Well, there may be a workable alternative to Chase, Discover, Bank of America and the other A-List card companies. According to the Pew report and other sources, credit unions are offering better terms on their credit cards.  That’s an option I mentioned briefly a few days ago and it warrants a little more attention.

Credit unions, unlike banks, are non-profit institutions. WisBusiness.com describes them like this:

Credit unions are cooperative financial institutions that are owned by their members and do not have stockholders. Because they are not-for-profit, they return earnings to members in the form of more competitive rates of return on accounts, lower interest on loans, lower fees and improved services.

Because they’re structured differently and have different goals in mind, credit unions are beating the big bank competition when it comes to credit cards. A recent Bloomberg story reported that credit unions have lower penalty charges and lower interest rates than the major card issuers. They’re offering a better deal but, surprisingly, they account for only about 1% of the nation’s credit card lending!

Eva Norlyk Smith, Ph.D, noted that the quality difference between CU cards and traditional bank cards goes beyond the better numbers associated with credit union offerings.  The unions are less likely to be engaged in the kind of nefarious behavior that has many up in arms:

Perhaps most importantly, the study found that credit cards issued by credit unions were less likely to feature “unfair or deceptive” practices. Almost half of the credit union cards had no penalty rate, and for those that did, the default interest rates were substantially lower than for bank credit cards. The median penalty interest rate was 17.90 percent compared to 28.9 for bank credit cards. Further, default penalties were less likely to continue on indefinitely. For about one third of the credit union cards, the penalty rate would automatically reset to the normal purchase APR once the cardholder paid on time for 3 to 12 months.

So, if credit unions are so much better than the alternative, why do they only have 1% of the total market share?  Well, that’s because many folks don’t think it’s easy to join a credit union.  While you can walk into any bank and open an account, you usually need to be a member of a particular group or community to be part of a CU.

Additionally, switching your banking over to a credit union can be a little more time-consuming and may require a bit more effort than what many people are willing to engage in.  Time is money and convenience matters.

Those factors, combined with a general lack of awareness regarding the benefits of credit unions are some of the major reasons why the big boys keep getting more business while CU’s chug along quietly in the background.

If you’re willing to make the switch, many credit unions will provide you with kits that make the transition easier.  If you’re worried about not qualifying for any particular credit union, there are tools available to help you find one for which you’d be eligible.  A recent Forbes article pointed out one CU that almost anyone can join!

If you can’t get the deal you want from a major credit card issuer and are willing to take a little action to save what may be a substantial sum, banking with a credit union might be a very smart move!