Anyone that has a credit card likely realizes how true the title of this article is. There are a lot of variables to look at when deciding which card is right for you. And just because you may not have perfect credit, it doesn’t mean that you have to go to the dark side of the credit card empires. So, let’s take a look at some of the variables.
Interest Rates: This is one of the main things you should consider. Even if you aren’t “planning” on carrying a balance, if you get a bit behind and end up with one that 24.99% interest adds up quickly. National cards don’t really play in the low interest sandbox anymore, so your best friends for that are your local bank or credit union for competitive rates. A rarity is to find one with less than 10% and no annual fee. But it can be done.
Annual Fees: Sometimes a low interest rate comes with a price. Namely an annual fee. This is a way for financial institutions to make money off you even if you don’t use your card, or don’t carry a balance. Sometimes it’s a predatory practice used by companies that market to those with a bad credit history.
One of the cards widely considered the “worst” is the First Premier Bank Gold Credit Card. In addition to a ridiculously high 36% interest rate, they also charge you a $95 “processing fee” for your newly opened account. Along with a high first year annual fee of up to $125, followed by subsequent annual fees of up to $49. Plus, they charge up to $10.40 as a “monthly fee” (or $124.80 more per year) AND a 25% fee for a credit limit increase! This is basically taking advantage of people looking to better their credit score.
These practices aren’t limited to the bad credit end of the spectrum though. Luxury Card offers three options for those with very good-to-excellent credit. Their Titanium, Black, and Gold cards carry a 17.24% interest rate, which isn’t terrible until you add in the respective annual fees of $195, $495, and $995. I suppose if you absolutely have to have a gold plated credit card and you want to waste $995 a year to get one…
Balance Transfers: In theory, it’s a good idea to move a balance from one card to another. Especially if you expect to pay off the balance within the promotional period. In practice, just don’t run up the balance on the card you’re transferring that balance from.
Many cards will offer a 9-18 month promotional period of zero or low interest on a balance transfer. But read the fine print. There is most likely a “balance transfer fee” of between 2-5% and/or a fixed dollar amount. You may end up saving money initially. But it may end up costing you more in the long run. So be sure to check the interest rate you’ll pay after the promotional period.
A handy tool for this is the Balance Transfer Calculator provided by creditcards.com. They have many other resources for those starting a credit journey as well.
Secure Cards: If you’re really interested in rebuilding your credit, several major financial institutions offer this option. Your credit limit is based on the amount of money you deposit with them.
Capital One offers perhaps the most versatile of these with minimum deposits starting at $49. However, you get no rewards and a high interest rate of 26.99%. Though in the world of credit rebuilding, high interest comes with the territory.
A better option would be the Discover it Secured card. While the minimum deposit is higher ($200), the interest rate is slightly lower (25.24%) and you can immediately start earning cash back rewards on the card. Also, they reevaluate your usage in 5-6 months at which point they will return the deposit to you and convert the card to a standard Discover it card.
Another, lesser known, option would be the Applied Bank Secured Visa Gold Preferred card. While it does carry the same minimum deposit of $200, it also has a very low APR of 9.99%. But, carries a $48 annual fee. Depending on usage, that may balance out for you.
Store Credit Cards: Widely considered easier to attain for those with limited or bad credit, this can make for a great entry back into the world of credit cards. Keep in mind, you’ll likely have more limited options on where to buy. And most come with higher interest rates. So you’ll have to determine if that new winter coat is really on sale when all is said and done.
The Amazon Prime Rewards Visa Signature card is one of the best. Issued by Chase, it offers 5% back on all purchases at Amazon.com or Whole Foods Markets. And, it’s only available to Amazon Prime members. But, if you shop Amazon often, that 5% adds up quickly.
The Target Red Card can only be used at Target stores or on Target.com. But it gives an automatic 5% off every purchase, an extra 30 days to return merchandise, and free shipping on Target.com purchases. Regular credit reviews can increase your credit limit a couple of times a year. Target also has a Red Debit Card which connects to your bank debit card and allows for the same benefits as the credit card. though it will not help in rebuilding your credit.
JCPenney provides a tiered credit card program, starting with their red card and working up to platinum. Again, you are limited to JCPenney stores and website. Though they have also added those Sephora stores inside JCP and the Sephora.com website. Like Target, Penney’s regularly does reviews of the accounts and increases limits regularly.
There are others out there, but it is a lengthy list. Basically, check the terms on the card for stores you frequent. Then research the reviews to see if it’s right for you.
There are other fees to take into consideration as well. Always click that little “Terms & Conditions” button before filling out the application. Make sure that the various fees are something that you can live with before applying.
A word of warning, like many things in this world, credit can become addicting. Make sure that you are prepared for the burden that you may be putting on you and your family.
WalletHub.com offers their list of the worst credit cards in several different categories. And that’s a great place to start. Whenever you’re looking into extending your credit footprint, do your research.
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