What Makes a Bad Credit Card?

There are literally hundreds, and maybe even thousands, of credit cards you can choose from. Of course, not all these credit cars are good deals. Some of them are excellent, the credit card that everyone wants to have but not everyone qualifies for. Then, there are some that are despicable, that you should never consider when you apply for a credit card. As you look at different credit card terms, here is how you know if the one you are considering is a bad credit card.

It has a high interest rate.

Interest rate is one of the biggest factors to consider when you’re getting a credit card, especially if you know you’re going to be carrying a credit card balance. The interest rate has a direct influence on the amount of your finance charges. These interest charges are added to your balance whenever you don’t pay the full balance at the end of the month or when you have a cash advance or balance transfer.

A high interest rate credit card is a bad deal because you’ll be stuck paying the highest finance charges on your credit card balance. Average interest rates these days are around 11%-14% depending on the type of credit card. If the credit card interest rate is higher than that, you should consider another credit card.

There is a high annual fee.

High annual fees aren’t always bad. Some premier credit cards have high annual fees, but these credit cards also have high credit limits and a lucrative rewards program. So, if your credit card has a high annual fee, make sure it offers something in return for the additional cost. That “something extra” should be significantly better than what similar credt cards are offering.

High upfront processing fees.

Many of the credit cards aimed at people with bad credit also have high processing fees that are added to your credit card as soon as the card is opened. Fortunately, there are laws that cap these initial fees at 25% of the credit limit. However, the credit limit on these cards is typically low and any fee leaves you with significantly less available credit.

It doesn’t report to the credit bureaus.

Credit bureau reporting is especially important if you’re signing up for a credit card so you can improve your credit. A credit card that doesn’t report your payments to one of the three major credit bureaus – Equifax, Experian, and TransUnion – is pretty much a waste as far as your credit is concerned.

Rewards require you to carry a balance.

Look out for credit cards that offer cash back or other rewards that are significantly higher than what all the other credit cards are offering. At least one credit card promises to give 10% cash back on your credit card purchases, but you only get that cash back when you carry a balance on your credit card. That means you’ll have to pay interest on your charges just to get your rewards. You can reward yourself by avoiding interest and paying your balance in full every month.