Two Harvard doctoral students made the argument that credit cards offered by credit unions are a "great test case" for the newly-signed Credit Card Accountability, Responsibility and Disclosure Act.
In a June 23 New York Times op-ed, Ryan Bubb and Alex Kaufman said they conducted a study comparing credit union and bank credit cards. They found that credit unions are less likely to charge the fees and penalties that would be eliminated under the new legislation. Most credit unions do not increase the interest rate if the borrower fails to make a minimum payment and they tend to have lower annual fees and longer grace periods.
Bubb and Kaufman acknowledged that "credit unions have the advantage of being exempt from corporate income taxes."
"But this is a proportional tax on profits. In other words, if credit unions were not exempt from the tax, their model would still make profits, they would just retain less of them," the op-ed read.
Still, credit unions are a good model to follow, the authors said
"Credit union cards demonstrate that punishing fees are not an essential ingredient of profitable lending. This should help assuage fears that the credit card act will bring disaster for credit cards. Rather, it should nudge them toward the gentler credit union model that many Americans already enjoy."
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