October 2, 2023

4 Red Flags That a Credit Card Isn’t Right for You

Applying for a new credit card can open up the door to earn generous rewards,…

4 Red Flags That a Credit Card Isn’t Right for You

Applying for a new credit card can open up the door to earn generous rewards, a new cardmember bonus, and cardholder perks. But you need to make sure you’re careful about which cards you apply for because you don’t want to end up with the wrong one.

In particular, you should watch out for these four red flags that suggest a credit card may not be a good one for you.

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1. Fees that aren’t justified

Some cards charge few or no fees, but others impose a lot of costs for being a customer. You could be looking at annual fees, balance transfer fees, and foreign transaction fees, along with a host of other potential costs.

Sometimes, these fees aren’t necessarily deal breakers. If the card has an amazing sign-up bonus, great perks, and really generous rewards, then it may be worth paying an annual fee for it. Or if you don’t ever travel, you may not care if a card has high foreign transaction fees.

But if the card charges a lot of fees that you’re likely to end up paying, make sure you think carefully about whether the rewards and perks it comes with are worth paying for. If you won’t cover the annual fee by earning enough extra rewards or valuable perks, then opt for a different card.

2. High interest rate

Most credit cards have high interest rates, but some have higher rates than others. If you won’t ever carry a balance, then this may not matter to you.

But if there’s even the slimmest chance you might end up with a balance you have to pay interest on, you should prioritize finding a card with a low rate. That’s because rewards are rarely worth more than 1% to 3% of what you spend, and a high credit card interest rate can dwarf their value.

3. Paltry rewards program

There are tons of great rewards credit cards out there that provide the chance to earn generous miles, points, or cash back for your everyday spending. There’s very little reason to accept a card that offers no rewards or one that offers a program that isn’t generous.

Unless you’re getting the card for a very specific reason — such as a competitive balance transfer offer — look for one that has the best rewards program you can find that’s well matched to your spending.

4. Low credit limits

If a credit card company tends to offer very low credit limits, you may want to steer clear of it. A low credit limit makes it more likely that you will end up using more than 30% of your available credit. This can do damage to your credit score.

It isn’t always easy to find this information since credit card companies don’t necessarily publicize what your credit limit will be in advance of applying. But you may want to call the credit card company and ask about the typical line of credit extended or research what types of credit limits other people have been awarded.

With tons of different credit cards out there, don’t settle for one that charges high fees, a high interest rate, or one that offers you a poor rewards program. Instead, take the time to compare credit cards and find the best card for your situation.