The Credit Card Accountability Responsibility and Disclosure Act of 2009, sometimes simply called the CARD act, is a federal statute that was passed by Congress and signed by President Obama in May 2009. The bill was intended to protect consumers from predatory credit card companies, and to ensure fair and transparent practices on the parts of the banks. The bill established important protections, such as:
- Credit card holders are protected against arbitrary and immediate interest rate increases.
- Card holders cannot be penalized for paying on time. If they make a late payment and their interest rate goes up, then they make six consecutive payments on time, the rate must be returned to what it was before the increase.
- Protects credit card holders from due date gimmicks. For example, your payment cannot be considered late if you can prove that it was mailed within seven days of the due date; it cannot be considered late if it arrived before 5pm on the due date; and the due date cannot be changed.
So on the whole the credit card environment has become much safer and more transparent for consumers.
However, there are still some bad credit card offers out there. Here are the absolute worst offenders in the credit card world. Even if you have bad credit and cannot qualify for a better deal, these are still cards to avoid at all costs.
1. Worst Credit Card #1 – Highest Annual Percentage Rate
29.9%, no grace period. This crappy, mercenary deal is offered by Applied Bank, based in Delaware, with their Unsecured Visa Gold card. No grace period means that when you put a charge on the card, the bank begins charging you interest immediately. That’s just crazy.
Retail cards – store cards – typically have very high rates as well. Looking at Best Buy’s credit card for example, the standard rate on their HSBC-issued cards can be as high as 27.9%, while the rate on their Chase cards can be 29.9%.
JC Penny was also recently blasted by CNN for their store card, which carries a 26.9% rate.
So beware of these retail store credit cards. Although they often run interest-free or interest-deferred promotions (“No interest for the first six months!”), if you don’t pay off the entire amount of your purchase before the end of the grace period, you’ll get walloped with a huge amount of retroactive interest. It’s very ugly.
2. Worst Credit Card #2 – Highest Fees
Applied Bank is two for two – two foul balls, that is. Their Gold Match Plus Visa card has an APR of 23.9%, no grace period, and a monthly maintenance fee of $15. Maintenance? Sure, they probably send a technician to your house every month to polish the card so it shines… But there’s more. If you make a late payment or exceed your credit limit you get hit with a $35 fee, and if you want to increase your credit limit there’s a $100 fee. Why? Well just because, my friend, just because.
3. Worst Credit Card #3 – Worst Penalties
The CARD act protects holders of consumer credit cards from certain predatory practices of the past. For example, the credit card company cannot jack up the APR on an existing balance, and has to give you a grace period and a warning before raising your APR. But there’s a loophole: this only applies to consumer cards, not business credit cards.
The winner in this category, according to Odysseas Papadimitriou, CEO of CardHub.com, is the Chase Ink card. The card has a default APR of 29.9% — 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 straight out of the pre-CARD Act playbook – a reminder of the bad old days – but there’s more. If a card holder misses a payment on any other Chase loan product, those penalties kick in for the credit card as well. What’s more, Papadimitriou points out, the APR will be stuck on the default rate indefinitely. Ugh. I’m feeling a little sick to my stomach. Filthy greed does that to me.
“The credit card companies have learned nothing about self-regulating,” Papadimitriou says. “They’re doing these hair-trigger repricing strategies.”
4. Worst Credit Card #4 – Worst Rewards
No, they don’t give you a toaster. In fact a toaster would be better than what these suckers offer. The first winner of this non-award is the Shell Select Member Card. It’s only good at Shell stations, doesn’t get you a discount on gas, carries a $25 fee, and gives you a very dubious reward: you get 5% to 10% cashback on airline tickets, car rentals and hotel reservations, but only if you book them through Shell’s own website. Bizarre enough for you? That means you can’t use this so-called reward if you book your travel ticket through an airline website, or a discount site like Expedia or Hotwire.
Loser number two is Radio Shack’s The Shack credit card. It’s packs a 28.9% interest rate, can only be used at Radio Shack, and do you know what wonderful reward you get? Think Energizer bunny… that’s right, you get a 15% discount on batteries. Ha ha ha… tell us another one, Radio Shack.
5. Worst Credit Card #5 – the Runner Up
The Discover More card is not as all-around bad as the previous lemons, but there are problems to be aware of. Discover markets its “up to 1%” cash back on everyday purchases, but the catch is that the reward doesn’t kick in unless you spend $3,000 in a calendar year. Otherwise you only get 0.25%. Furthermore, warehouse club and discount store purchases are excluded from the deal. So if you charge your card heavily for retail purchases, and don’t shop much at warehouse stores, then it’s not a bad card. Otherwise, it’s a stinker and you should stay away.