Is One of the Worst Credit Cards in Your Wallet?

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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.

Fees matter
Just imagine the admiring stares you'll get when you whip out Barclays ' 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 they also give shareholders a reason to smile . By providing its credit network to issuers like Barclays and Applied Bank, Visa (NYSE: V     ) raked in more than $8 billion in sales last year annually on our collective card use, while major card-issuing bank JPMorgan Chase earned more than $2.1 billion in net income from its card division.

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 recent reforms .

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 60% ! Consumer Reports 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; Nordstrom 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 contains.

J.C. Penney 's (NYSE: JCP     ) card charges an APR of almost 27%. General Electric's (NYSE: GE     ) 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; RadioShack 's (NYSE: RSH     ) Shack Credit Card charges almost 29%.

Rewards matter
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. HSBC '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 $39.

If you seek your rewards in the form of discounts at the gas pump, be choosy. Royal Dutch Shell's (NYSE: RDS-A     ) Shell Select Member Card, issued by Citigroup's (NYSE: C     ) Citibank, charges a 25% APR and a $25 annual fee. ConocoPhillips (NYSE: COP     ) and Citgo 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 Discover 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. Be smart -- 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 vultures.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Basics , Credit and Debt

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