Credit Cards (US)

Credit Card red flags you should steer clear of

Learn about the red flags you should watch out for when applying for a credit card. With so many offers available, it's important to know what to look for before signing up.


by Aline Barbosa

Published on 12/05/2022

Learn how to spot the warning signs before you sign up for a credit card offer

Don’t fall into a financial trap: learn about credit card red flags! Source: Freepik.

Facing the decision of choosing the perfect credit card for your needs might seem a little overwhelming at times. But there are a few credit card red flags that could really save you a lot of time and money. 

There are hundreds of credit cards in the market who can help people who don’t have a lot of options.

But some of these cards are more expensive and much more hazardous than others. 

Sure they might be a lot easier to qualify for, but that doesn’t happen without a price.

And the price usually comes in the shape of high annual percentage rates and a neverending list of unnecessary fees. 

To make sure you’ll find the right card for your current situation, you need to be able to spot a few warning signs before signing up.

That way you can avoid the wolf in sheep’s clothing and not drown your bank account in fees.

Check below some credit card red flags to watch out for. 

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How to spot important credit card red flags

Almost everyone has a credit card these days, and they can be pretty handy for emergencies or big purchases.

But like anything else, there are risks associated with credit cards if you’re not careful.

Here are some tips on how to spot important credit card red flags before you get in over your head.

Too many fees

When it comes to credit cards, fees should be one of the first red flags to watch out for. Too many fees can be indicative of a credit card that isn’t worth your time.

Some credit cards may come with monthly maintenance and/or annual fees, extra charges for cash advances or transferring balances, foreign transaction fees, and more.

Be sure to read the credit card agreement carefully and look for any fees that you weren’t expecting.

If these fees add up too quickly, it’s probably best to find a credit card with more reasonable terms.

Additionally, some credit cards may offer rewards or cash back but require certain spending thresholds to qualify – so make sure those don’t add up to too much, either!

Ultimately, credit cards should make managing your money more convenient; if you find that the fees are making it more cumbersome than helpful, it’s time to look for a better option. 

Remember to always read credit card contracts and agreements so that you understand any potential fees or requirements.

Your credit is important, so make sure you are making smart decisions and staying on top of credit card red flags.

It’s always worth the extra effort to save yourself from any potential financial headaches in the future.

High interest rates

High interest and too many fees are some of the red flags. Source: Freepik.

When it comes to credit card red flags, high interest rates are one of the most worrying.

The annual percentage rate (APR) on your credit cards is determined by several factors – credit score, type of card and even promotional offers.

This can range from anything between 0% APR all the way up to 30% or more.

A higher APR means that you’ll be paying more for credit card purchases, so it’s important to know what kind of rates you’re dealing with.

Even though the interest rate only applies if you carry a balance from month to month, it’s still worth watching out for.

Emergencies and money problems could happen to anyone, and a high APR could mean a financial snowball. 

Keeping an eye on any credit card red flags – like high interest rates – is a great way to stay in control of your finances and avoid getting into credit card debt.

Shop around for the best deals and compare rates between credit cards. Then you’ll make sure you’re getting the lowest interest rates available.

You can also speak to your credit card company and see if they can provide any further discounts or benefits.

By being aware of credit card red flags such as high interest rates, you’ll be able to make smart credit decisions and enjoy financial freedom.

A low spending limit

Some credit cards are not worth it. Source: Freepik.

Subprime unsecured credit cards usually entice new customers by advertising their spending limit range.

However, what you’ll qualify for specifically usually depends on your overall creditworthiness. Having a low credit limit on a credit card can do more harm than good. 

For instance, if you get a card that charges different types of fees (like an activation fee or an annual fee), you’ll need to subtract those charges from your initial credit limit.

That means that if you have a spending power of $300, an activation fee of $20 and an annual fee of $70, then your credit limit is actually $210 until you pay off your first balance.

So, basically, you’re in debt before you even begin using your new card. 

Another important credit card red flag when it comes to a low credit limit is the effect it has on your credit utilization ratio.

Credit utilization is one of the main factors that can build up or shoot down your credit score. 

Credit bureaus recommend all cardholders to keep their credit utilization ratio below 30%.

So, if you have a low credit limit, you won’t have much spending power to begin with. 

Doesn’t report payments to credit bureaus

One credit card red flag that you should watch out for is if the credit card issuer does not report payments to credit bureaus.

This means that when you make a payment on the credit card, it won’t show up on your credit report.

So even if your credit utilization ratio drops or your credit score improves due to making payments, credit bureaus won’t be able to see it.

This credit card red flag may make it difficult for you to build credit or improve your credit score.

Thats because credit reports are often used by lenders and credit agencies to determine creditworthiness.

Be sure to check if the issuer reports monthly payments before signing up for a credit card. That way you can maximize the benefits of its use. 

How many credit cards should you have?

It’s a question that’s often debated – how many credit cards should you have? Some people say one is enough, while others believe you should have as many as possible. So, what’s the right answer? 

Check the link below for some interesting pointers. We’ll discuss the potential highlights and lowlights of having more than one credit card to help you make a decision.

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How many credit cards should you have?

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About the author

Aline Barbosa

Aline Barbosa is an editor, writer and learning-enthusiast. Passionate about music, books and human behavior. Curious about the unknown. Believer that learning is a life-long process.

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