Credit cards all look more or less the same -- slim pieces of
plastic with a few numbers and a little hologram on each. (And, OK,
maybe a picture of kittens, if that's your thing.) But depending on
which card you've chosen, that placid plastic exterior could hide
an awful, needlessly expensive ripoff.
Even if you don't carry any of the following lousy examples, as
cited by the folks at CNNMoney
, this rogue's gallery of credit card creeps can provide helpful
reminders about what to look for when choosing a card.
Just imagine the admiring stares you'll get when you whip out
' attention-grabbing Visa Black Card. Then again, imagine your
shock when you get the bill: Even if you don't charge a penny on
it, the Black Card will ding you for a $495 annual fee! In
exchange, you'll get back 1% of your airfare purchases, access to
many airport VIP lounges, and a few other perks. Unless you happen
to be Bruce Wayne or James Bond, the expense may still outweigh the
rewards for you.
Elsewhere, the Applied Bank Unsecured Visa Gold Card charges you
$125 in your first year and $180 after that. In addition, it
imposes steep interest rates, and it doesn't even offer a grace
period before interest starts accruing.
These lousy cards may cause the people who carry them grief, but
give shareholders a reason to smile
. By providing its credit network to issuers like Barclays and
) raked in more than $8 billion in sales last year annually on our
collective card use, while major card-issuing bank
earned more than $2.1 billion in net income from its card
On rare occasions, a card that charges an annual fee does offer
benefit that merit the expense. But with many cards charging no
annual fee, why pay up if you get little or nothing in return? And
if you currently pay no annual fee, keep a close eye on any changes
to your credit agreement. Many issuers have begun to institute
fees, angling to recoup revenue lost from
Interest rates matter
You might think you're getting a bargain by paying $75 to $100 or
more in annual fees and processing charges just to get the First
Premier Bank MasterCard. Well, you're not. The card, aimed at folks
with poor credit records, charges an annual percentage rate (APR)
that ranges from an already high 23.9% to almost
also counts it among the worst cards around, citing its high fees
and user-unfriendly terms. Unfortunately, most of its holders carry
a revolving balance, meaning that on $5,000 of debt, they're paying
$1,200 to $3,000 in interest -- each year! That's no way to
dig out of debt
Retailer reward cards may not be much better. In the past, many
retailers managed their own credit card businesses;
and a few others still maintain in-house management. But today,
many have shifted the administration, the risk, and much of the
profit from their cards, to banks. That might explain some of the
staggering fees this slice of the credit card market now
) card charges an APR of almost 27%.
) GE Capital unit, which issues the card, highlights its discounts
on JCPenney purchases -- an admittedly great perk, if your bills
are paid off. But if you're paying gobs of interest, you're most
likely wiping out your discounts -- and then some. As CNNMoney
notes, "On a $300 purchase, if the consumer makes the minimum
payment, it would take 27 months -- and $103 in interest -- to pay
it off." Still, J.C. Penney's card could be worse;
) Shack Credit Card charges almost 29%.
If you pay off your bills in full each month, it can make sense to
have a low- or no-fee card that pays you rewards based on
purchases. But perks like these vary widely.
's Household Bank Premium Platinum MasterCard and its 1% cash back
offer may look good at first. However, the card charges an APR of
19.9% after an introductory 0% period, and an annual fee of up to
seek your rewards
in the form of discounts at the gas pump, be choosy.
Royal Dutch Shell's
) Shell Select Member Card, issued by
) Citibank, charges a 25% APR and a $25 annual fee.
also charge steep interest, but forgo the annual fee, at least.
Don't dismiss the Shell card out of hand, though -- as with all
cards, consider your particular needs and weigh the costs and
benefits. It offers 5% off gas, which can really add up these days.
If you spend $200 per month on gas, the card will save you $120 per
year -- or $95 after the annual fee.
If you're carrying $3,000 in debt, though, that 25% APR will
cost you $750. A lower-rate card would be the smarter choice. Also,
some cards give you 1% to 5% off gas without tying you to a
particular brand. I've got a
card like that in my own wallet.
To make sure you're not paying more than you need to, you need
to be demanding when choosing a card, and vigilant in monitoring
it. Credit cards are helping many financial companies
make billions of dollars
off people like you. The retailers they often partner with are
making millions, too.
-- don't let yourself get ripped off.
Debt's not just for students; everyone needs to get a handle on
all of their debt. Visit the
Fool's Credit Center
and get all the answers you need to beat back the credit