Credit Cards to Avoid at All Costs

a lady scowls at her credit cards - worst credit cardsIn our recent roundup of top credit cards researched by the folks at CardRatings.com, the results were obvious: Banks' predictions after the CARD Act kicked in that you'd never be able to get your hands on a new credit card if your credit wasn't in tip-top shape were an exaggeration. Although your choices are better if you have excellent credit, there are still good deals out there for consumers who are willing to do their homework and read the fine print.

But there are also a handful of cards out there that are simply not great picks for consumers. We spoke with a few experts about the cards with the worst interest rates, fees, penalties and rewards to suss out the offerings that benefit the issuing bank more than their credit card customers.

Take a look at which cards are lurking at the bottom of the credit card barrel.Highest Annual Percentage Rate

There's actually some good news in this category. The infamous First Premier credit card with its 79.9% interest rate has vanished, as have its predecessors, a 59.9% and a 49.9% APR card, also from First Premier. First Premier's quiet withdrawal of its 49.9% APR offering came shortly after the bank was blasted by CNN in a recent article. "I think that kind of proves that because you charge a higher rate doesn't make it a good card," says John Ulzheimer, president of consumer education at SmartCredit.com. "Maybe bad press can eliminate these rates."

Unfortunately, other issuers seem happy to fill the vacuum left by First Premier's absence in this market segment. Applied Bank out of Delaware markets the Unsecured Visa Gold card. It's bad enough that the card's APR is 29.9% -- a bit higher than some of the crummier retail card offers we've seen, and on par with major banks' default rate -- but there's a huge zinger in the card's terms and conditions: There is NO grace period. In other words, from the instant a cashier swipes that card, you're racking up nearly 24% interest.

As for retail credit cards, they typically have very high rates; one we'll point out here is Best Buy. The fine print on its financing page says that non-penalty APRs for cards issued by HSBC can be as high as 27.9%, while those issued by Chase can go up to 29.9%. Default rates, of course, climb even higher. (This is even higher than the standard rate for jcpenney's retail card, which was recently lambasted by CNN for its 26.9% rate.) Although stores like Best Buy often run interest-free or interest-deferred promotions, if you fail to pay off every single cent of your purchase by the end of the grace period, you'll be smacked with an enormous amount of retroactive interest.

Highest Fees

We have to give a second thumbs-down to Applied Bank in this category for its Gold Match Plus Visa card, which is a hybrid secured-unsecured card; you have to put up a minimum of $300, but the bank guarantees a credit limit of $300 more than your deposit. While it "only" has an APR of 23.9% -- also with NO grace period -- the fees this card carries would knock your socks off.

First of all, there's an annual fee of $125 the first year, which is taken right off the top of your deposit; after that, a monthly maintenance fee of $15 (that's $180 a year) kicks in. As Curtis Arnold, founder of CardRatings.com, points out, these numbers would probably be even higher if it wasn't for the CARD Act, which prohibits fees from eating up more than 25% of a card's credit limit.

The outrageous fees don't end there, though. Late payments and overlimit charges both get you slapped with a $35 fee, and if you'd like an increase on your credit limit or wish to upgrade your card, there will be a $100 fee for each of those.

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Worst Penalties

The CARD Act prevents issuers from hiking interest rates on existing balances and makes the bank give you both a grace period and a warning before raising your APR, but those protections only apply to consumer credit cards. One loophole of the CARD Act is that it excludes business cards, and some of the rules here are positively Dickensian. A top offender, according to Odysseas Papadimitriou, CEO of CardHub.com, is the Chase Ink card. The card has a default APR of 29.9% -- which is bad enough -- that applies to existing balances as well as future balances, if you make your payment even a single day late.

So far, this is pretty standard pre-CARD Act policy, but the devil, as they say, is in the details. If a customer misses a payment on any other Chase loan product, those default penalties will kick in, too. In other words, if you have a Chase consumer card and you pay late, your business card will suffer the hit that the CARD Act keeps the bank from applying to the consumer card. What's more, Papadimitriou points out, the APR will be stuck on the default rate indefinitely. Ouch.

"The credit card companies have learned nothing about self-regulating," Papadimitriou says. "They're doing these hair-trigger repricing strategies."

Worst Rewards

There are two contenders here: The Shell Select Member Card is our first entrant. Being that it's a gas card -- only good at Shell stations, not other retailers the way Shell's co-branded MasterCard is -- you'd expect it to offer you a discount on gas, right? Wrong. Even though this card charges a $25 fee and is only good for Shell fillups, you don't get any rewards for your enforced loyalty. The program gives you a measly 5% to 10% cashback on airline tickets, car rentals and hotel reservations, but only if they're booked through Shell's proprietary site -- which means you can forget about getting rewards on that auction-site steal you were pondering for your summer getaway.

Our second loser is Radio Shack's The Shack credit card. The card carries a hefty APR of 28.9%. There's no annual fee, but that interest rate, coupled with the fact that you can't use the card anywhere except Radio Shack, would make you think there must be some terrific cashback discounts associated with the card. In reality, you get 15% off ... batteries.

Although it's not an all-around stinker on the order of our other entrants here, we'd be remiss if we didn't mention one more card. Both Arnold and Papadimitriou brought our attention to the Discover More card, the flagship offering of the company that pioneered the cashback-card genre.

"Look under the hood, because very few people know this," Arnold says. While Discover markets its "up to 1%" cash back on everyday purchases, that 1% only kicks in after you've spent $3,000 in a calendar year. Prior to that, cardholders earn a paltry 0.25%. In addition, warehouse club and discount store purchases are excluded (although Discover does offer 5% cashback on a rotating series of categories like grocery stores and restaurants).

"It's one of the better cashback cards for more aggressive chargers, but for someone who doesn't charge a lot, it's a crummy card," Arnold says. "If you don't charge a lot or if you shop at discount stores, this card is terrible."

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