Signs of Bad Credit Cards and How to Avoid Them
Everyone knows that bad credit cards are out there, but many people do not know how to know if a particular card is good or bad. When you compare credit cards, what should you look for in order to tell whether or not you have a good card? What features of a credit card should you avoid, and which should you look for when choosing a card? Here are the answers to some of these common questions.Interest Rate Is a Good Sign
Typically, the interest rate on a credit card will be between 7% and 36%. A number around 15% seems to be average, but cards do vary widely. If you have had a card for a long time, there are many ways you could have increased your interest rate. You could have a card with an interest rate near the 36% mark if you make many late payments. Every time a payment is late, the interest rate increases.
Some cards will increase the interest rate for no reason at all. A variable rate card that does not carefully spell out the terms in which it can increase rates is a bad card. You could have a low interest card when you first get it, only to find that the interest rate steadily increases until it is extremely high. This means your card could have been a good card when you got it, but your late payments may have made it into a bad card. Dealing with debt credit cards with high interest rates are extremely dangerous and financially devastating.
Secured Versus Unsecured Cards
Another thing to consider when you are looking to avoid bad credit cards is whether you are shopping for secured credit cards or unsecured credit cards. Secured credit cards are good cards to use when you are building your credit score, but they are bad cards to hold onto for the long term. This is because they require you to put down a deposit against the card. This deposit is used if you should fail to make the payment on the card.Unsecured credit cards, on the other hand, do not require this deposit. You simply use the card and then pay back what you owe. However, if you have a terrible credit rating, getting an unsecured card will be difficult, if not impossible. For this reason, secured cards make it possible for people with a bad credit history to still benefit from owning a credit card. Of course, you will be able to find many examples of an unsecured bad credit card, so don't assume that a card is good simply because it is unsecured.
Other Terms to Consider
What else makes a credit card bad? Most of the things that make credit cards bad credit cards are found in the fine print on the credit card agreement. For instance, some cards charge an annual fee. This fee gives you nothing but the privilege of using the card. In the past, cards with annual fees had better rewards programs, but in today's competitive credit card market, almost all credit cards have great rewards programs. There is no reason to pay a fee simply to be able to use a card.Some MasterCard and Visa credit cards will charge application or processing fees. Again, you should not have to pay before you even get the card! The credit card company is going to make a lot of money from your business over the lifetime of that card, so why should you pay these fees as you are applying for the card? You shouldn't, and these are not good credit cards for you.
While fees are not unavoidable on credit cards, a bad card will have many more fees than its competitors. Account termination fees, balance-transfer fees, late fees, and over-the-limit fees are all common, but some are not necessary. Avoid a card that charges a fee for just about anything you would want to do with it.
Now that you know a little about bad credit cards, you will be able to better avoid them in the future. Remember, the key to avoiding the worst unsecured bad credit card problems is doing your research. The more you know about a card, the better able you will be to make the right decision. Take the time to do your homework before you sign up for any credit card offer!
