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You’re in a bad credit situation, but you need a credit card. It can be hard to qualify for credit cards if your credit isn’t up to par. But there are credit cards out there that can help those with bad credit improve their score. Unfortunately, there are also credit cards that can take advantage of those with bad credit. You’ll want to look out for the red flags for credit cards.
If you want to choose the right credit card, you’ll need to know what to avoid. That’s why we’ve listed seven major red flags to be on the lookout for. We don’t want you have a bad credit card on your hands. And trust us—you don’t either.
1. Sky-high interest rates
People with bad credit usually can’t qualify for the same interest rates as those with good or fair credit. It’s the industry’s way of protecting itself against risky customers. But some cards aimed at people with bad credit charge unnecessarily high interest rates—sometimes more than twice what someone with good credit can get.
The best way to avoid sky-high interest rates is to shop around and find the cards for bad credit that offer lower rates. For example, the Green Dot primor Visa Classic secured credit card offers a variable 13.99% APR and higher credit limits once you make five monthly payments on time.
2. High annual fees
Some credit cards for bad credit charge no annual fee while others charge fees, but keep them on the lower end. Then there are cards that charge upward of $100, which is comparable to annual fees for some high-level rewards credit cards. But an annual fee more than $50 without any rewards perks might be a red flag. Typically, there isn’t a reason to shell out more than $50 for an annual fee if the card doesn’t have a rewards system.
Looking for a card for bad credit with fair annual fees? Take a look at the Secured Visa from Merrick Bank. The annual fee is only $36, billed $3 a month thereafter.
3. Tacked-on fees
Some credit card issuers will tack on suspicious fees that most credit cards don’t include. These may include processing or application fees required to open your card or monthly maintenance fees that add to your annual cost.
While annual fees and late payment fees are commonplace, look out for excessive fees that would lead you to pay much more for the card than you bargained for. Make sure you understand the card’s fee structure before you apply.
See: 8 simple credit rules every consumer should follow
On the other hand, don’t knock secured credit cards from a reputable card issuer. These cards require you to put up a security deposit that, in most cases, you eventually earn back by managing your account responsibly.
4. Incomplete credit reporting
To improve your credit score, your credit card activity must be reported to all three major credit bureaus—Experian, EXPGY, -0.03% Equifax EFX, +2.09% and TransUnion. TRU, +2.49% If your card issuer doesn’t do that, it limits how much your card can help you improve your credit.
This is why a secured credit card, which requires a security deposit, is preferable to a prepaid debit card. Prepaid debit cards don’t typically affect your credit because your account information and payments aren’t reported. You should make sure any card you’re considering reports to all three of the main credit bureaus.
5. High credit limits
High credit limits sound great. But when it comes to credit cards for bad credit, you may want to be wary. For one thing, you may have to pay a lot of fees or an excessive interest rate to access a high credit limit. For another, high credit limits can quickly spiral out of control if you have trouble managing your debt.
6. A lack of monitoring
People with bad credit need to pay extra attention to their finances. If a card offers no way to monitor your credit progress or keep track of payments, you may want to keep looking. Opt for a card that has online account options and email or text alerts for upcoming payments so you can more responsibly manage your on-time payments—timely payments account for 35% of your credit score, after all.
7. No room for improvement
Cards for bad credit should be designed to improve your credit and reward you for responsible behavior. If they don’t, you should look for a card that does. For instance, secured credit cards may offer the ability to earn an unsecured card after a period of responsible use and timely payments. Or, they’ll offer to raise your credit limit without requiring an additional deposit.
Watch: How bad is it if I don’t pay off my credit card every month?
Start your research on credit cards that can help improve your credit score by checking out this roundup of credit cards for bad credit. Remember, before applying, you’ll want to find out where your credit stands by checking your credit score.
This article originally appeared on Credit.com.
