The Worst Credit Cards of 2012
Credit card expert highlights some credit card offers you should avoid
Thursday, November 1, 2012
A number of lenders compete to convince you their credit card is best. But what are the credit cards you should avoid?
For starters, avoid cards that levy high interest rates and charge a large annual fee. There are just too many cards out there that offer better deals.
The credit card site CardHub.com has analyzed the current offerings -- more than 1,000 -- and come up with a handful of cards that it says consumers should avoid.
General consumer credit cards – rewards
Credit card companies offer rewards, either cash back or points toward other purchases, to build loyalty. The worst in this category, according to CardHub, is the Visa Black Card, a product offered by Barclaycard US. This is not to be confused with the famed Centurion Card from American Express.
While the latter is a status symbol and a pop culture staple, CardHub says the former is just grossly overpriced, charging a $495 annual fee for a measly 1 point per $1 spent, airport lounge access and the vague promise of luxury gifts.
“It’s obvious that the Visa Black Card’s pricing is one of the ways that Barclaycard US is trying to fool consumers into thinking they’re getting the Black Card they see their favorite musicians and actors flaunting,” said Card Hub CEO Odysseas Papadimitriou. “They want you to think, ‘If it’s that expensive, it must be the real deal.’ However, the Centurion Card is rumored to have a $5,000 initial fee and a $2,500 annual fee. Besides, its secrecy is part of its lore, so the fact that you can even apply for the Visa Black Card online or see commercials for it on TV should tip you off that it’s not the real deal.”
General-consumer credit cards – big-ticket new purchases
Some credit cards give you a low introductory rate for new large purchases. Obviously, the lower the rate and the longer the introductory period, the better. CardHub says Arvest Bank Classic Credit Card offers a 4.9 percent interest rate for six month before it kicks up to 17.9 percent. CardHub says you can do a lot better.
“There are simply too many credit cards out there offering 0% introductory APRs for well over a year to even consider a card whose intro rate is nearly 5% and lasts for only six months,” Papadimitriou said. “In fact, the average 0% credit card offers that rate for over 10 months. This card’s inferiority is best illustrated when you compare it to the likes of the Citi Diamond Preferred and Citi Simplicity cards, both of which offer 0% on new purchases for 18 months.”
General-consumer credit cards – balance transfers
Consumers often apply for a new credit card that will allow them to transfer a high-interest balance from another card and pay a lower interest rate. That's a sound strategy for speeding up the pay-down of your account balance.
The worst of the balance transfer cards, according to CardHub, is the UBS Preferred Visa Signature card. It offers a 9.99% introductory balance transfer APR for 6 months and charges a 3% balance transfer fee as well as a $495 annual fee. Papadimitriou says there are plenty of cards that offer a 0% balance transfer option. A much better choice, he says.
A number of cards promote themselves as a means for consumers to rebuild a damaged credit rating. All too often the cards in this category have the worst terms for consumers. But CardHub says the First Premier Bank Gold Card stands out.
In addition to a 36% interest rate, this card charges a $95.00 processing fee prior to account opening, a $75.00 annual fee during the first year, a $45 annual fee in each subsequent year, a $6.25 monthly fee beginning in the second year, and a 25% fee for any credit limit increase.
“When you’re building credit, you want a card with the lowest possible fee structure,” Papadimitriou said. “And under no circumstances should you waste $170 in fees when you can take $30 more and place a $200 fully refundable security deposit for a secured credit card with a $29 annual fee.”
“I knew that the credit limit was going to be very low ($300), but didn't care as my only intention was to further establish my credit,” Les, of Bradley, IL, wrote in a ConsumerAffairs post about First Premier. “However, I didn't read all of the fine print (my fault) prior to receiving the card and soon found out that by the time they were finished applying all the needless charges i.e. annual fees, one-time fees, etc., I actually only had roughly $50 available for spending purposes. In the end, I ended up -$250 by the time I received the card.”
Credit card for students
Many students head off to college with a new credit card for expenses or emergencies. Which one should you avoid. CardHub awards the honor to U.S. Bank College Visa, saying it doesn’t provide any rewards or low introductory rates and students may end up with a regular APR as high as 20.99% APR -- the highest rate among student cards.
A common mistake consumers make is applying for a card based on an advertising mailer that arrives in their mailbox. The best strategy is to think about what you want from a credit card and compare as many options in that category as possible.
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