Despite record-low interest rates for most loans, and consumer-friendly reforms made real through the CARD Act, the market remains plagued by credit cards built to murder your savings faster than a big-screen serial killer stalking a slumber party.
Here are the five most common ways the worst credit cards, as identified by CardHub.com, prey on unsuspecting consumers:
1. Monstrous fees in exchange for an empty coffin of rewards. Those with excellent credit may want to show off how well they're doing with a prestige card. Visa's (V) Black Card, which is backed by Barclays' (BCS) U.S. credit card group, is designed to fill that niche while giving off the feel of American Express' (AXP) legendary -- and for most of us, unattainable -- black Centurion card.
Barclaycard's offering is nowhere near as exclusive, yet still charges a "grossly overpriced" $495 annual fee for one point of rewards per dollar spent, says CardHub Chief Executive Odysseas Papadimitriou, who previously served as a senior director in Capital One's (COF) credit card division.
2. Promises of heavenly interest rates that end in high-rate hell. Arvest Bank hopes you'll bite on a 4.9% introductory interest rate on new purchases for six months in pitching its Classic Credit Card. And that is a decent deal -- right up until the introductory period runs out and the rate spikes to 17.9%, more than 3 percentage points higher than the average.
"There are simply too many credit cards out there offering 0% introductory APRs for well over a year to even consider a card whose intro rate is nearly 5% and lasts for only six months," Papadimitriou says. "This card's inferiority is best illustrated when you compare it to the likes of Citigroup's (C) Diamond Preferred and Citi Simplicity cards, both of which offer 0% on new purchases for 18 months."
3. Double the fees for double the nightmare. Indebted consumers can sometimes find refuge in balance transfer cards that offer relief while they build up savings to pay off what they owe. With an astronomical $495 annual fee combined with a 3% balance transfer fee -- plus an "introductory" rate of 9.99% on transferred balances -- UBS' (UBS) Visa Signature offers no such relief.
With such unattractive terms, UBS shouldn't even be pitching its Preferred Visa Signature Card as a balance transfer credit card, Papadimitriou says.
4. Interest rates that mummify your chances of becoming debt-free. The absolute worst of the worst are cards that bilk consumers who have few other choices because of efforts to rebuild bad credit. First Premier Bank's Gold Credit Card is just this sort of trap.
"When you're building credit, you want a card with the lowest possible fee structure," Papadimitriou says. "And under no circumstances should you waste $170 in fees when you can take $30 more and place a $200 fully refundable security deposit for a secured credit card with a $29 annual fee."
5. Marketing rewards while delivering virtually invisible benefits. In offering just 0.5 points for every $1 spent plus a 5,000 initial spending bonus, U.S. Bank's FlexPerks Select Rewards Visa Business Credit Card delivers about half what consumers can get elsewhere, CardHub.com reports.
And the Loser Is... Everyone But the Banks
Worst of all, this isn't a comprehensive list. At least one other piece of plastic poison found in CardHub's review -- U.S. Bank's College Visa -- preys on ignorance in that it offers no rewards or introductory rates. Instead, students can end up paying upward of 20.99% interest when an otherwise fresh credit history should qualify them for substantially better deals.
We can all do better than what most of the industry is offering, CardHub.com said in a blog post announcing its picks for the worst credit cards:
"In an effort to garner the business of consumers with above-average credit scores, banks have been offering increasingly lucrative initial rewards bonuses and 0% introductory APR deals ever since the end of the Great Recession ... Picking the wrong card is tantamount to skipping the house that gives out King Size candy bars on All Hallows' Eve."
What credit cards are you using right now? Are you shopping for a better deal or fresh from taking advantage of a sweet deal? Make your voice heard by leaving a comment in the space below.
Motley Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. The Motley Fool owns shares of Citigroup. Motley Fool newsletter services have recommended buying shares of Visa and creating a write covered strangle position in American Express.