When used properly, most credit cards offer you the chance to build your credit rating without spending any extra money. Some cards are absolute money pits that should be avoided at all costs, however. Even if your credit rating is not stellar, there is no reason to put up with outrageous interest rates and crazy monthly fees for the privilege of carrying a credit card. You can find a card that will give you what you need without taking you to the cleaners.
Ridiculous Interest Rates
Credit card companies make their money from charging interest rates on revolving balances. Some cards take the practice too far, though. Retailers like JC Penney's and Radio Shack don't discriminate between customers with good or bad credit ratings. Everyone is charged nearly 25% interest on every transaction. Shell also hits every customer with nearly 25% interest on every purchase. The First Premiere Bank MasterCard is meant to help people with low credit ratings improve their standing, but the 59% interest rate has probably contributed to more bankruptcy than it has contributed to saving people from financial ruin.
If interest rates weren't enough, some credit cards charge annual fees for everyone who carries the card. The Applied Bank Unsecured Visa card charges you an annual fee of $125, which becomes $180 after the first year. With a credit limit of $500, you would be better off just paying for items with cash. The First Premiere Bank MasterCard also charges a standard $120 annual fee. The Visa Black Card is the worst offender when it comes to annual fees, however. You will pay more than $400 every year just for owning this card. All of these cards also charge high fees for customers who make late payments or exceed their credit limits.
Expensive Cards That Don't Help Credit Ratings
RushCards have become popular among people who are interested in carrying special credit cards and don't want to pay with cash. The Baby Phat Prepaid RushCard fulfills the bling requirement, but it makes customers pay dearly for the flash. Monthly charges, ATM fees, and fees for using the card for debit transactions are expensive, but they aren't the worst things about this card. Using a prepaid RushCard will have no impact whatsoever on your credit rating. Since the main reason to use plastic is to establish credit, your fees and extra charges are wasted on this pretty piece of plastic.
Rates Rise After Introductory Period
The Household Bank Premium Platinum MasterCard offers a 0% APR for the first year of use. After that first year is over, though, your balance will be hit with a 19.9% interest rate, no matter what kind of credit rating you have. If your credit score is even in the medium risk range, you should be able to qualify for a card that offers less than 20% interest. Even if you pay off all of the charges during the first year of owning the Household Bank Premium Platinum MasterCard, the cost of using it the second year is not worth owning the card.
High Monthly Rates
Some credit cards charge interest and also charge monthly rates. The Baby Phat Visa RushCard will cost you $9.95 every month, whether you use it or not. The Hooters MasterCard charges $4 per month, regardless of your balance. Paying monthly credit card fees is similar to making monthly purchases on your card - only you don't get to take anything nice home with you. Both of these cards also charge interest on any revolving balance, so the additional monthly charge will be added to your balance and included in your interest payments.
The Shack Card from Radio Shack is probably the most expensive low interest card you can use. During the first year you can carry a certain balance without being charged any interest at all. Once that first year is over, though, the Shack will begin applying a 28% interest rate to your revolving balance. What is worst is that the interest is retroactive and will apply to all of your previous purchases. The only way to avoid the retroactive interest rates is to make sure everything is paid off within a specific period of time.
Heather Hollingsworth is a single mother raising three teenagers while she attends graduate school and feeds a budding freelance writing career. She's always looking for a new way to stretch a dollar as far as it can go!