10 Credit Card Red Flags to Avoid

Choosing a new credit card is more complicated than it seems. The sheer number of choices can be overwhelming, and even once you've narrowed it down, you have to dig into the fine print to really understand what you're getting. For those who are new to credit cards, it's a challenging task. But you can make it easier on yourself by equipping yourself with key knowledge.

To start, you should rule out any cards that have one or more of these 10 issues.

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Some cards charge annual fees. These might be justified if the card offers lucrative perks, like free annual travel vouchers, but this isn't always the case. Sometimes the card issuer charges more because the card is geared at those with poor credit, who have a higher risk of default.

It's up to you to decide whether the benefits the card offers justifies the fees it charges. Compare it with similar cards from other issuers to see how its benefits and costs stack up. If you decide it's not worth it, you should know there are plenty of other cards out there that offer rewards and have no annual fee. One of these might be a better fit.

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Credit cards often have additional costs beyond an annual fee. Some are pretty common in the industry, like extra fees for cash advances. Then, there are other charges that make sense with certain cards and not others. A foreign transaction fee might not bother you on your everyday credit card that you use for gas and groceries, but it could be a serious issue on a travel rewards card.

It's important to be aware of all fees your card has. Review this before you sign up and make sure there's nothing there that poses a serious inconvenience to you. If you have any questions, ask the credit card issuer before applying for the card.

Interest rates shouldn't be a huge concern if you routinely pay your credit card balance in full. But it can be a significant factor for those trying to pay down credit card debt. A high annual percentage rate (APR) will cause your credit card balance to grow more quickly. This can make it more challenging to get out of debt.

If you have poor credit, you can expect to pay a higher APR than someone with good credit. But the right balance transfer card may keep your APR low for a while to help you pay off your debt. Look for a card with a long 0% introductory APR period and then do your best to pay off your debt within that time frame.

A low credit limit restricts how much you can charge to your credit card. It could also lead to a higher credit utilization ratio. This is the ratio between how much you charge to your card each month and your credit limit. So someone with a $2,000 monthly balance and a $10,000 limit would have a 20% credit utilization ratio.

You should keep your credit utilization ratio under 30% whenever possible to keep your credit score high. A card with a low credit limit may make this impossible. In that case, you're better off looking for a card that will offer you a higher credit limit. Or you can just keep your spending on that card low until you improve your credit enough to qualify for a better card.

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For those trying to improve their credit or keep their credit score high, it's nice to choose a credit card that reports your payment history to all three credit bureaus. You never know which credit report a lender is going to look at when evaluating your credit history, so it's important to keep all three scores high.

If you're unsure which credit bureaus the card issuer reports to, reach out and ask before signing up.

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Just because a credit card offers some valuable perks doesn't mean it's a good fit for you. For example, a popular travel card probably isn't right for your wallet if you rarely leave home.

Make sure you look into the rewards the credit card offers and think about how they line up with your spending habits. Ideally, you want to find a card that gives you rewards for the things you buy most and flexible points or miles that you can spend on things you enjoy.

A credit card may also be a poor fit if it's almost identical to another card in your wallet. If you have two similar cards, one will likely end up sitting unused in your wallet.

Look for a card that complements the other cards in your wallet instead. If you have a card that offers great rewards on groceries and dining, consider looking for a new card that offers rewards on gas instead. Then, you can strategically use each card for specific purchases to maximize your rewards.

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A credit card's terms and conditions usually detail any restrictions related to the perks it offers, including expiration dates on rewards points. It's important to familiarize yourself with these before you sign up, as some of these restrictions could make a card much less appealing.

Again, if you have questions about anything you find in the cardholder agreement, you should always seek clarity from the card issuer. You don't want to make any assumptions and find out later they were wrong.

While it is possible to manage your credit account without an online portal, it's more challenging to do so. You may have a more difficult time doing simple tasks, like checking your balance or making a payment, and since you can't instantly access a transaction list, it might take longer to recognize when your card has been stolen.

Fortunately, most major credit card issuers today have online portals for all their cards. However, some store credit cards may not have this yet. It's something to weigh when deciding whether a card is a good fit for you.

You should be able to read the credit card's cardholder agreement before you sign up for the card, and it's important to do so. This helps you know what you're getting and recognize any limitations of the card. Credit cards that don't make these agreements easy to find may be trying to hide some unfavorable terms.

Reach out to the card issuer if you're unable to find the cardholder agreement for a card you're interested in. You may also be able to find them with the Consumer Financial Protection Bureau.

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After going through the red flags listed here, you may decide the card you were interested in isn't such a good fit for you after all. That's OK. There are plenty of other options out there. Take your time and look for one that's a good fit.

You'll likely have your credit card for many years, and closing one after you open it could hurt your credit score. So make sure you really like the card you're considering before you fill out your application.

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