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American credit card holders are lucky to enjoy an extremely competitive market for credit cards. There are dozens of credit card issuers that (combined) offer hundreds of different products for every possible use. Even better, those with good-excellent credit are used to finding their mail boxes stuffed with offers, which is a pretty good indication that cardholder’s business is highly valued.
Although there are many great products being offered, you will have to sift through a bunch of mediocre, and even crummy credit cards to find the gems. So when you are fishing for a great card, how do you know which offers to keep and which one to toss back into the sea?
Here are six kinds of cards you’ll want to avoid:
1. The card with inferior rewards. Reward credit cards offer us valuable points, miles, and cash back, and the most recent cards come with ever more generous rewards. Nevertheless, there are still plenty of rewards cards that haven’t kept up with the competition. These are cards that offer a puny 1% cash back, or worse, an equal amount of points that can only be redeemed for overpriced merchandise.
2. Store credit cards with bad terms. It seems like every retailer offers its own store credit card and shoppers are encouraged to apply with the incentive of a discount. Too often these discounts don’t amount to much for any typical purchase, and the cardholder is left with a card that has some pretty poor terms and conditions. For instance, store cards generally have very high interest rates and fees, even charging retroactive interest, and just so-so reward programs.
3. Sub-prime cards that charge monthly fees. There is a whole category of credit cards that are marketed towards people with bad credit, often called the sub-prime market. While there are some good secured cards from reputable banks, there are plenty of junk cards that charge monthly fees. These fees always add up to more than the annual fee of a good card, and their presence is a quick way to realize that the card is not worth considering.
4. Cards with no grace period. A grace period offers cardholders a chance to avoid interest charges by paying their balance in full. While federal law now requires grace periods to be at least 21 days long, it doesn’t actually require card issuers to offer a grace period at all! So there are still some cards, usually the so-called sub-prime cards, that have no grace period. That means that cardholders are immediately charged interest on all purchases, and there is no way to avoid interest payments by paying their statement balance in full.
5. Cards that aren’t that bad, but aren’t that great either. In this competitive market, not being labeled as credit cards for bad credit just isn’t good enough. So smart credit card users learn to avoid cards that don’t offer rewards, don’t come with low interest rates, and don’t even have compelling features and benefits. There are so many great cards out there, that you shouldn’t settle for an inoffensive card that really does nothing else for you besides allow your money to be held in the form of plastic.
6. Credit cards with high annual fees, but little value. There are plenty of credit cards with an annual fee that offer tremendous value in the form of rewards, perks, and benefits. On the other hand, there are some cards with overpriced annual fees that aren’t really justified. Perhaps these cards make sense for some users who are able to leverage a particular benefit, but if that isn’t you, then there is no reason to keep paying the annual fee.