5 Ways You Know You Have the Wrong Credit Card

5 Ways You Know You Have the Wrong Credit Card

July 23, 2018         Written By Bill Hardekopf

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There are many credit cards that offer excellent rewards and benefits, but if you do not have a card geared toward your spending habits, you may be missing out.

To help determine whether it’s time to shop for a new credit card, here is a list of five things that could indicate you have the wrong card.

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#1: You have a high interest rate
Credit card interest rates can climb as high as 29.99%, which means you could be wasting lots of money each month if you are carrying a balance. Let’s say you have a credit card balance of $5,000, and your interest rate is 29.99%. If you can a payment of $175 each month, it will take 51 months to pay off your debt, and you will pay $3,879 in interest. However, if you can qualify for a card with a 15% interest rate and pay that same $175 each month, you will eliminate your debt in 36 months and pay only $1,225 in interest, a savings of $2,654. Obviously, you will pay the debt off faster and pay less interest if you can direct more money to your credit card debt. It is never a good idea to make only the minimum payment. As these two scenarios demonstrate, if you are carrying a balance each month, it is a sign you need to find a credit card with a lower interest rate.

#2: You’re paying an annual fee for rewards you don’t use
While many rewards credit cards charge no annual fee or a relatively low one, some issuers charge as much as $495 annually. Whatever your annual fee, if you are not using the card enough to accumulate travel or other rewards, it is a waste of money. You would be better off finding a card that does not charge a fee—and there are plenty out on the market—or one that better rewards you for your spending.

#3: You have travel rewards that you don’t use
Another indicator you have the wrong card is that you are earning free flights and seat upgrades, but you don’t have time to travel. If you rarely go anywhere, a travel credit card is not right for you. You may be happier with a cash back rewards card, such as the Citi Double Cash Card, which offers unlimited 1% cash back on purchases and an additional 1% cash back when you pay for those purchases.

#4: You have a secured credit card, but your credit has improved
Perhaps you are someone who has suffered from a low (or no) credit score in the past, so you opened a secured credit card to build a positive credit history. If you have been using the card responsibly for a year, it may be time to revisit your credit score to see if you can qualify for an unsecured card.

A secured credit card is one in which you deposit money with the card issuer, and you can charge up to that amount each month. While using this card responsibly can help you increase your credit score, it is not a good solution in the long-term. Not only will you want access to a higher credit limit, secured credit cards also offer few rewards benefits and often carry a high interest rate. If you have good or fair credit, a secured card is not the way to go.

#5: You are using your personal card for business expenses
The final sign you may have the wrong credit card is that you are accumulating business expenses on your personal credit card. For tax purposes, it is important to keep your business and personal expenses separate. So it is usually wise to obtain a small business credit card for your company. Additionally, if you plan to grow your business, it is smart to start building your company’s credit so you can apply for business-related loans or other credit cards in the future.

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If you have noticed any of these five signs, it is time to take a look at your credit score and find a card to help maximize your rewards.


About Bill Hardekopf

Bill Hardekopf is the CEO of LowCards.com and covers the credit card industry from all perspectives. Bill has been involved with personal finance for over 15 years. He is a frequent contributor to Forbes, The Street and The Christian Science Monitor.
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