4 Types of Credit Cards to Avoid at all Costs

It's a good idea to use credit cards for most purchases, as long as you can be responsible with your cards. Credit cards can have many benefits, including helping you to earn a good credit score as you show you can use them responsibly.

But, while having a card is, in general, a smart move for your personal finances, there are some cards that there's just no good reason to sign up for. In particular, here are four kinds of credit cards you should avoid.

1. Store credit cards

Store credit cards typically have a higher interest rate than other credit cards (which is saying a lot, since card interest rates are really high in general). Cards that can only be used in the store that issued them have an average interest rate topping 30% in 2023, which is well above the 21.19% average interest rate the Federal Reserve reported for commercial bank credit cards as of August 2023.

Store cards also typically offer rewards that are only good in the shop that issued them, and rewards programs aren't usually as generous as many offered by other general-purpose card issuers. Plus, you may have to spend extra money to use your rewards earned from a store card. Say, for example, you get a $10 rewards voucher that has to be used in a certain time period and the cheapest thing you want at the time is $20. You'd have to spend extra to use your rewards.

While it may be tempting to sign up for a credit card issued by your favorite shop, you may be far better off just using a general-purpose card when shopping there that charges you a lower APR and that offers a more flexible rewards program.

2. Cards without rewards

There are a ton of great rewards cards out there, so there's no typically no reason to use a card that offers no rewards at all (except in limited cases if, for example, you're getting a secured card to help you build credit).

Let's say you charge $10,000 a year on your credit card. If you pick a card offering 2% cash back, you could walk away having actually spent $200 less thanks to that cash back you got from your card company. But if you had instead got a card without rewards, the $10,000 you charged on your card would have actually cost you the full $10,000.

You should find a card with a rewards program that gives you bonus rewards for the spending you do most. For example, you may want a card offering 5% back on travel purchases if you're a jetsetter. You should pass up any card offering no rewards at all, unless there's a very specific reason for considering it.

3. Cards with high APRs

If you plan to carry a balance, you should avoid a card with a high APR. APR, or annual percentage rate, is a measure of total costs of borrowing over the year -- including interest and fees.

As mentioned above, most credit cards have pretty high APRs. This doesn't matter if you'll pay off your card in full. But if you want to finance a purchase over time, your top priority should be to look for a card with the lowest financing cost possible (such as a card with an intro 0% APR offer). That way, you can keep the cost of borrowing down to a minimum.

4. Cards with annual fees that aren't justified by the perks

Finally, if a card charges an annual fee, you should avoid it unless the cardmember perks you'll actually use end up making the fee worth it.

For example, if you sign up for a card that comes with a $95 annual fee, but also provides a $100 credit for airline purchases, that card would be OK as long as you traveled enough to use the credit. But if you were scared to fly and the card had no other unique benefits you could use, it wouldn't make sense to pay $95 a year for it.

Ultimately, you should make sure to carefully research any credit card you're considering to find out how the rewards work, as well as what fees you could potentially face. If you do that, you'll find a far better option than these card types you should avoid.