right-way-wrong-wayConsumers are receiving a crash course in economics due to the current state of the economy. As more and more Americans realize the importance of properly managing their personal finances, the attitude toward credit card use is changing. While many people are deciding using credit card accounts is simply too risky in this day and age, there are still plenty of consumers who will continue to use credit cards as a financial tool. When managed properly credit cards offer many benefits, however not all credit cards are created equal. To determine which card is right for you, determine your financial goals to see if your new card will help your financial situation or end up costing you more money in the long run. Here are a few cards that you think twice about before adding to your credit arsenal.

Credit cards that do not report to credit reporting agencies. Whether you are trying to establish credit or maintain a good credit score, you need to have your credit card activity reported to all three credit bureaus. Without this information all of your efforts to properly manage your credit card account are for naught. Granted, properly managing your account will keep your finances in good order but without the activity being reported to the agencies, no one will be the wiser. You don’t want your hard work and responsible behavior to go unnoticed by future lenders. Avoid this scenario by confirming the card you are applying for will report your credit activity.

Prepaid and secured credit cards can cost you money. Most often used by people who have bad credit or no credit, credit cards that require a cash deposit for collateral often come with high fees. If you fail to properly research and understand the terms and conditions of these forms of credit you may find up to 50% of your deposit is consumed by various fees. To avoid this look for cards with low interest rates and minimal fees.

Department store credit cards don’t offer real savings. Have you ever reached the checkout register and when presented with the amount due, the clerk mentions you can save ten, fifteen or twenty percent if you apply for and use their store credit card? Most of us have been in this situation and while it is tempting to go ahead and accept that offer and the savings that come with it, proceed with caution as these cards have a way of costing your more money in the end. Department store credit cards are notorious for having very high interest rates which make it inadvisable to use them for “perceived” savings unless you are certain you will pay the balance in full. Carrying a balance on this type of card will quickly reverse the savings at the cash register and you could end up paying double or triple the original price.

Rewards programs that cost more than buying the product outright. For consumers who regularly use credit in a responsible manner a good rewards program can offer many benefits. The key to reaping the maximum reward from these programs is finding one that works with your current spending habits. You should not use your rewards credit cards to incur debt that you cannot afford simply to get the miles, points or cash back benefits. In most cases you could have saved the money for that purchase and paid less than the amount of money you have to charge in order to accumulate the necessary points or miles on your reward program. Again, if you are already using your card for purchases, it makes sense to get the rewards, however you should not use the card just for the rewards.

Finding and using the right credit card can help you manage your finances and reach your financial goals. Avoid credit cards that have more drawbacks than rewards which can put an unnecessary strain on your budget.

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