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By: Aquib Nawab
Finance
Store cards like Amazon, Target, etc. tend to have very high interest rates, usually over 20%. The rewards and benefits are limited to that store only. So if you don't shop there often, it's not worth getting their credit card just for the store perks or discounts. The high interest rates mean any balance you carry will rack up interest quickly.
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Credit cards with very low limits like $300 or $500 limit your spending but also limit how much you can prove your creditworthiness. Paying off a small limit doesn't demonstrate you can handle a bigger credit line responsibly. Low limit cards prevent you from getting meaningful rewards as well. Also, maxing out your card negatively impacts your credit utilization ratio.
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Avoid credit cards that charge exorbitant annual fees (over $100), high balance transfer fees (3%+), high foreign transaction fees (3%+), etc. The costs outweigh the benefits. For instance, a 3% balance transfer fee on a $5000 balance is $150 lost. Compare cards and their fees first before applying.
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Secured cards require an upfront security deposit that becomes your credit limit. This deposit is tied up while you use the card. Try getting a student card or starter unsecured card first as they are easier to qualify for with a deposit.
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If you can't maximize the rotating 5% bonus categories on quarterly category cards, you won't earn much in rewards. Pick a flat-rate cashback card for automatic rewards instead of trying to remember which card to use each quarter.
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Initial sign-up bonuses on credit cards give an easy way to earn extra rewards. Cards with bonuses lower than $200 have less incentive to open over better offers. Compare sign-up bonuses before applying for a card.
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Prepaid cards work more like gift cards with money you load onto them vs a line of credit. They don't report to credit bureaus or help build credit like real credit cards. Avoid prepaid cards if your goal is to build your credit history.
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Credit cards for bad credit from predatory lenders often have very high fees. Try secured cards first to rebuild credit without excessive fees. Gradually improve your score before applying for better unsecured cards.
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Store branded credit cards like Gap, Victoria's Secret, etc. tend to have higher APRs than general rewards cards. Decline the store's card offer and use your existing rewards card for the purchase instead.