Thread: Credit cards you should stay away from

While credit cards can be a great utility, overusing them can cause more damage than benefit. From the bunch of years I’ve spent monitoring the credit card industry, I can give you a thumb rule. Never take a credit card unless you are SURE of what it offers. You must be aware of introductory rates, annual fees, interest rate, late payment charges, and related expenses before signing up for a credit card. Apart from the conditions, here’s a list of few cards that you must avoid:

Prepaid Cards
People that have a poor credit score can get such type of a credit card when they give cash deposit as collateral. Because of accepting cash deposit as a lending condition, credit card issuers that offer prepaid or secured credit cards charge consumers with high fees. You may realize after buying a prepaid card that a higher proportion of the monthly payment is going in fees or towards the interest and not lowering your principal balance. Therefore, it is good to stay away from prepaid cards.

Store credit cards
Whenever you go to store, the person at the counter tries to sell you a store card that suggests ‘heavy’ discount on the next purchase. While the offer may be tempting, it is good to know the interest rates in advance. Generally, store credit cards have high interest rates, which may drag you into higher costs than originally promised savings. Select store credit cards only when
- You have read the terms and conditions
- You are fine with the high interest rates
- You are confident that you will be able make monthly payments on time
- You know the late payment structure, etc.

Credit cards that do not share records with credit rating agencies
The importance of reporting your credit card activity to the credit bureaus cannot be overstated. If the credit card issuer does not send your information to the credit bureaus, your credit score is unlikely to improve despite paying regular payments. And, if your credit score does not improve, there are remote chances that your credit worthiness will meliorate. So, in order to drive lender’s attention to your rising credit score, you must select only those credit cards that share your records with credit bureaus.

In conclusion, as a consumer you must carefully select your credit card to avoid bad experience in future. Careful selection will also keep you up with the changing financial scenario as well as maximize your rewards.



Source: Money Matters