Not all credit cards are created equal.
Certain types of credit cards are riskier than others. So, before making any financial decisions, do your homework and choose credit cards that work best given your circumstances. That means looking for cards that offer favorable rates and conditions to suit your needs.
In this article, we will look at the types of credit cards that carry the most risk and why.
Key Takeaways
- Riskier credit cards tend to prey on those who are financially vulnerable. To prevent instability down the line, make a conscious effort to avoid untrustworthy lenders and control your finances tightly.
- Avoid all credit cards with questionable terms and conditions, such as complex reward structures or high upfront fees. These types of credit cards can lead to bad credit and poor money management.
Credit Card Risks
Credit cards are a great way to boost your credit scores and gain financial security when used correctly and responsibly. However, all credit cards do carry some form of risk. Most of the time, the risks result from human error, especially if you are prone to miss payments or carry a balance over every month.
But, some credit card providers prey on people with limited financial knowledge. While all providers are obligated to disclose their interest rates and terms and conditions upfront, some providers will mask this information from unsuspecting borrowers to entrap them with high APRs, extortionary fees, worthless rewards, and deferred interest propositions.
These types of credit cards are meant to drive you into bad debt and breed financial instability. In other words, you should run far away from these cards.
7 Types of Credit Cards to Watch Out For

Below are several high-risk credit cards to be wary of:
1. Credit Cards with High Fees Upfront
Most standard and reputable credit cards will not have any upfront fees when you first receive the card. But, some risker cards will pose a high initial fee before you’ve even made any purchases on them. Usually, these types of cards will boast sign-up bonuses or reward systems that seem too good to be true (and they probably are!). Additionally, they tend to hide the fees in the terms and conditions by using terms, such as additional cardholder fees, credit limit increase fees, participant fees, program fees, or setup fees.
2. Credit Cards with High APRs or Variable Interest Rates
Interest on your credit, or the annual percentage rate (APR), is an unavoidable cost of using credit cards. Before you apply for a card, you should have access to this information in the contract. But, while most reputable providers follow the average rates in the industry, some like to throw out a variable interest rate rather than a fixed interest rate that is astronomical and borderline comical.
With so many credit cards available to choose from, there are many options that do not have high APRs. For example, you can apply for 0% APR credit cards, such as the Citi Diamond Preferred Card or the Discover It Cash Back. Staying away from cards with high APRs will help you avoid financial strain and poor credit.
3. Credit Cards with High Monthly Costs or Ongoing Fees
It is standard for credit cards with exceptional features and perks to charge an annual fee, but be wary of credit cards that carry high monthly or ongoing fees. These types of cards tend to promote a monthly package of benefits that may seem incredible at first, but in reality, most users will not use any of the rewards or use less than the cost of the fees.
Before signing up for any credit card that carries a monthly or ongoing fee, calculate how much it will cost per year for the card and whether the rewards outweigh the cost. If you do not plan on fully leveraging the benefits, or they are less than the cost of the fee, then the credit card is probably not worth it.
4. Credit Cards That Promote a Deferred Interest Date
A credit card with 0% APR sounds like a great deal, but keep in mind that the APR will eventually return after the interest-free promotional period is over. Often, people will take advantage of the deferred interest date to spend more than they can afford and then end up owing significant amounts of money to their credit card providers.
If you have no problems paying off debt, these cards are great tools for building good credit. But, if you have no means to repay your balances, this puts you in a tricky financial position as you will get hit with high rates once the promotional timeframe is over, which can snowball quickly due to compound interest.
5. Credit Cards with No Reporting Policy
One of the main reasons people use credit cards is to build up theirĀ credit scores, which affects many aspects of our lives, from applying for mortgages to auto loans to jobs. Established credit card providers will report your credit habits to the necessary consumer credit reporting agencies, including Equifax, Experian, and TransUnion. But, not all providers will do so. Less reputable lenders will not report your spending and repayment history to the appropriate financial institutions, which means you will not be building up your credit score.

6. Credit Cards with Low Credit Limits
While credit cards with low credit limits do not sound that bad, using these types of cards will make it harder for you to get better terms in the future or keep your credit utilization ratio down. Your credit utilization ratio is the percentage of your total credit that you use every month and makes up a significant portion of your credit score. The rule of thumb is to keep the ratio below 30% since the more you use, the less responsible you appear to lenders.
One of my credit cards still has the same credit limit from when I first got the card back in 2018 as a college student. Even though my income has increased significantly since my college days, and I have made regular, on-time payments over the last several years, my credit limit remains unchanged. This is not a big deal since I have other credit cards available. But, if this were my only card, it would pose a problem because my utilization ratio would be much higher, hurting my credit score.
7. Credit Cards with Complicated Rewards Programs
Many people use credit cards to reap theirĀ rewards and offers. But, some credit card providers may create reward programs that are overly confusing and complicated to make people think they are getting a good deal when they aren’t.
Before applying for a credit card, take some time to understand the reward structure and whether it fits into your current lifestyle. For example, if you spend a lot of money on restaurants and groceries, look for a card that rewards you for those purchases.
The Bottom Line
Credit cards can be a great asset to your financial health. But, when misused, they can cause significant headaches and stress. Before choosing a credit card, make sure to do some research beforehand and only use reputable lenders that you can trust. Never accept credit cards with red flags even if you are struggling financially or desperate for credit, as risky cards will only worsen your financial situation.