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3 Credit Card Red Flags to Always Avoid
Avoid these red flags when you are looking to sign-up for a new credit card
Choosing the right credit card for yourself can be an exciting but difficult process. Let’s say you have taken steps to evaluate your spending habits and have determined the type of credit card that would allow you to gain the most rewards. Before you apply for a specific credit card, make sure to always avoid the following three red flags:
1. High-Interest Rates
2. Low Credit Limit
3. Partial Credit Reporting
1. High-Interest Rates
Even though you will be a responsible user of credit and pay off the full statement balance of your credit card every month, you should be aware of the interest rate charged by your credit card. According to The Balance, the average credit card interest rate is 20.45% as of January 2022. When it comes to that credit card you want, make sure you have read through multiple reviews to get an idea of the interest rate that will come with the card once you apply and are approved. Suppose a credit card has clear signs of interest rates close to or greater than 30%. In that case, you should always be aware of any predatory practices the issuer of that credit card may be involved in, such as having a hard-to-navigate website to enable automatic full monthly statement balance payments.
2. Low Credit Limit
When it comes to credit cards, specifically unsecured credit cards, you should aim to have a credit limit of at least $1,000 or more. It is recommended to keep your credit utilization below 30%, meaning that if your credit limit is going to be $1,000 on the credit card you want, you should not be spending more than $300 per month on that card. It is again important to read reviews for the credit card you want and understand how you can have your credit limit increased over time. If you see that it is not common for a credit card to have a credit limit over $1,000, avoid it, please.
3. Partial Credit Reporting
Please avoid that credit card you thought of applying for if it does not report your usage to all three major credit bureaus (Equifax, Experian, and Transunion). For any credit card you get, you want to make sure that your data is reported to all three major credit bureaus so that your report from each one can showcase your responsible usage of credit.
In gaining an understanding of the three credit card red flags to always avoid, you will position yourself to only apply for credit cards that will benefit and assist you with having a strong credit report. What do you think are some other red flags people should be aware of? Let me know!
