What to avoid when applying for a credit card

A previous article provided a list of recommendations for prospective cardholders to gain the best benefits possible from a credit card. Though it may not be possible to find each quality and feature suggested in one specific card, a cardholder can avoid certain features that will save cash in the future.

Countless cardholders are unaware of their credit cards’ features, or simply don’t know how seemingly small fees can accrue to costly sums. Before realisation hits, these cardholders often find themselves swamped with fees and other expenses. At these times it seems the expenses outweigh the benefits associated with the convenience of a credit card.

Cardholders should avoid cards that have:

Spending requirements. Some rewards programs have minimum spending requirements, and users may not start earning points or rewards until a minimum, such as $1,000 worth of purchases have been made. Ideally, the cardholder prefers points to be earned with the first purchase, and such cards do exist.

Blackout dates. Many cardholders are thrilled with their rewards programs, and use their credit cards heavily to land their dream vacations. However, some airlines and lenders have agreements in which the flight cannot be claimed during certain months, weeks, or seasons. Cardholders planning any vacation should ensure the provisions tied to the rewards scheme are well understood and plan accordingly, using the points before they expire.

Steep penalty fees. Practically all cards have late payment and other penalty fees; however, some cards have lower fees than others. For example, NAB previously charged $30 for late payments but recently reduced that fee to $5. To reduce expenses, applicants should seek cards with similarly low penalty fees. Surprisingly, some cards even charge fees for balances paid off too soon, and these cards should be avoided.

Usage fees. Different from annual fees, usage fees are imposed on cardholders if the credit card, usually a rewards card, is not used frequently enough for the bank’s liking. For the sake of simplicity within the billing cycle, these cards are generally best avoided by cardholders who don’t use them heavily and repay the entire balance in full each month.

Outrageous fees. Some lenders will boggle cardholders down with a number of different fees, exceeding the typical ones. Such outrageous fees include application fees, program fees, monthly participation fees, and additional up-front fees, and when summed up these various fees can exceed the card’s credit limit. Applicants should give preference to cards with the lowest possible fees.