This year's editor's choice awards illustrated so much of the positive change sweeping the personal finance business. With banks competing on price and service, consumers enjoy access to affordable, useful tools to manage their credit and make secure shopping decisions. Still, a handful of companies keep trying to cash in on your worst fears about money. When credit card and debit card issuers start convincing you to "get what you deserve," they deserve to land in our annual Hall of Shame:
Worst retail card
It's too easy to pick on Fingerhut. It's almost enough simply for their tendency to send retail and gift catalogs to consumers who recently experienced job losses, credit card defaults and other financial calamities. The products are just fine, and the catalogs are actually quite nice. And, at first glance, the APR on their WebBank-issued store credit card is about 10 percentage points lower than the highest APRs we saw on universal credit cards during 2012. While that's in line with many retail credit cards, Fingerhut's inflated pricing turns many name brand items into expensive impulse purchases that don't serve the goal of building a solid credit history. Buying an iPad here and paying it off over a year costs more than if you had purchased one directly from Apple using a credit card with a 40 percent APR. With some customers reporting on blogs and bulletin boards that Fingerhut only sporadically reports account activity to credit bureaus, there's no way that shopping here makes financial sense.
Most deceptive marketing
Applied Bank calls their Secured Visa Gold Credit Card "better than prepaid." The low, fixed APR in Applied's ads even make this card sound more attractive than many unsecured credit cards on the market. However, for a card to really be better than prepaid, it shouldn't cost any money to actually make a transaction. Because Applied Bank eliminated the typical grace period from this card's terms and conditions, cardholders start racking up finance charges the moment they make a purchase. In fact, with the minimum finance charge imposed on monthly balances, you could even wind up paying much more than the posted APR on small transactions.
Worst secured credit cards
The Matrix and the Cerulean Discover accounts both appeal to consumers who have been turned down by other lenders, especially after bankruptcy or extended unemployment. Their ad pitches promise no application fees or upfront service charges. They claim to be "hybrid" cards, not secured credit cards, since their systems will determine just how much of your credit limit you'll leave as a security deposit. Hunting through blogs and bulletin boards, we couldn't find a single customer whose "hybrid" account required less than a full security deposit. Both these cards bear the Discover logo, but they're not issued by Discover Financial Services. They're from a company called Continental Finance, who markets these products in partnership with an affiliated credit union. These cards manage to skirt federal predatory lending rules by charging an upfront fee against your credit limit, then imposing a monthly service fee. Those fees can amount to more than $200 per year, an outrageous price to pay when branch-based banks have started offer secured credit cards at less than one-fourth that annual cost.
Least magical prepaid debit card
We thought American Express would mostly blow out the remaining contestants in the "overpriced debit card" category after widening the launch of their fee-free Serve and Bluebird cards this year. However, a few "star-powered" cards hang on, oblivious to the notion that people don't like to spend money to use their own money.