The Most Overrated Credit Cards of 2011

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NEW YORK (MainStreet) — Credit card deals are a dime a dozen these days as issuers actively campaign to win back consumers they lost following the recession. But while it’s often easy to spot an awful offering – a  79.9% APR is among the more notable tip-offs – it can be a lot trickier to determine which credit card is actually the most lucrative.

“You have to look under the hood,” says Curtis Arnold, founder of CardRatings.com. He points out that issuers often include qualifiers in the fine print that keep certain offerings from being as awesome as solicitations or advertisements may indicate.

MainStreet talked to industry experts to find out which cards on the market could be considered the most overrated in 2011.

Applied Bank Platinum Zero Secured Card

This secured card will certainly appeal to credit newbies since it offers a 0% annual percentage rate that stays in place even when a consumer is behind in payments. But while the non-existent APR appears to be legit, consumers shouldn’t be so swayed by the card’s purported $0 annual fee.

“If you look in the fine print, you’ll find they charge a monthly maintenance fee of $9.95,” Arnold says. This adds up to $119.40 annually, which is no small fee considering secured cards require the holder to back their credit line with their own dollars.

Arnold also called out Applied Bank’s Gold secured card, which advertises a low annual 9.99% APR, but no grace period to help you avoid paying any interest.

Applied did not respond to numerous requests for comment via fax, which is the company’s preferred method for press inquiries.

Citi Bank Dividend Platinum Select Master Card

At first glance, Citi’s (Stock Quote: C) newer offering seems to carry a fairly decent rewards structure, touting 5% cash back on revolving quarterly categories and 1% back on all other purchases.

But consumers who click open the card’s terms and conditions will discover this very big caveat: “Unless the offer you received indicates otherwise, you may accumulate a maximum of 300 Dividend Dollars in any calendar year (eligible transactions appearing on your January - December billing statements) payable in checks of $50 increments only upon your request.”

“That’s a very, very low cap for rewards,” Arnold says. He explains that while most issuers will restrict how much a cardholder can earn on the revolving 5% categories, they have stopped putting caps on the rewards altogether. If there is one, he says, it’s usually much higher, falling somewhere between $500 and $1,000.

A spokesperson for Citi pointed out that while the cap exists, cardholders can earn more than $300 in a given year if they receive a sign-on bonus when they apply. The bank is also currently offering a $200 sign-on bonus to new cardholders who spend $1,000 within the first three months of their account’s opening or when they make purchases at the  Citi Bonus Cash Center, as the additional 5% back offered there is outside of the cap.

Barclays Visa Black Card

Invitation-only credit cards have grown in numbers during the past few years as issuers try to compete with American Express’s (Stock Quote: AXP) well-known Centurion card. But experts say consumers shouldn’t be fooled into thinking the Barclays Visa Black Card is comparable to some of the other elite competitors.

“It’s not really that hard to get,” says Kenneth Lin, CEO of Credit Karma. He adds that the perks are “not really unlimited. The only reason you get it is if you’re really into pretending, for lack of a better way to put it.”

This can be problematic seeing as the card carries a $495 fee and only offers 1% back on purchases as part of its standard rewards program.

“They’re advertising it as elite to give consumers the perception they are really getting something, but they aren’t,” says Beverly Harzog, credit card expert with Credit.com.

Barclays declined to comment. 

Bank Americard Cash Back Rewards card
Bank of America’s (Stock Quote: BAC) big commercial campaign for its Americard cash-back rewards card claims that the product offers 1% cash back on every purchase, 2% on groceries and 3% on gas. But cautious consumers will notice what Tim Chen, CEO of  Nerd Wallet, calls “a ridiculous footnote” next to the verbage. This footnote ultimately leads you to some  fine print explaining bonus cash back higher than 1% is limited to $1,500 per quarter in spending, after which it reverts to 1%.

“This means you only get less than 1% on the first $500 per month you spend inclusive of both gas [and] groceries,” Chen says.

Bank of America responded to the criticism by saying it has received a positive response from customers about the card. A spokeswoman also pointed out, “in addition to the 1,2,3 percent cash rewards, customers receive a 10% bonus when they deposit their cash rewards into their Bank of America checking or savings accounts.”

Discover More Card

We’ve pointed out before that Discover’s (Stock Quote: DFS) popular cash-back card had lower earning limits on its quarterly 5% bonus categories, but the product also comes with another caveat some consumers may not be aware of.

“Discover More only pays you 0.25% on the first $3,000 you spend each year, and 1% thereafter,” Chen says.

A spokeswoman for Discover confirmed the breakdown, saying “it’s a threshold we've always had that our card members tend to meet quickly.”

Despite the caveats, experts admit the card does have its positive attributes, including no rewards caps and additional bonus cash back at Shop Discover. Also, its terms and conditions are going to improve in the new year.

Discover’s spokeswoman also confirmed that earning limits on the 5% bonus categories will be raised in the first and second quarter of 2012, though third and fourth quarter limits have not been set yet.

Which credit cards really shined this year? Find out in MainStreet’s roundup of the best new credit cards of 2011.   

—Jeanine Skowronski is staff reporter for MainStreet. You can reach her by email at Skowronski.jeanine@thestreet.com, or follow her on Twitter at @JeanineSko.

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