A column on personal finance prepared by the Virginia Society of Certified Public Accountants


(June 23, 2004) — Used properly, credit cards offer significant safety and convenience benefits. But mistakes with your credit can cost you dearly--in time and money and in terms of your credit rating. To help you avoid costly credit card errors, the Virginia Society of CPAs highlights the most common credit card mistakes an how to avoid them.

1. Not Shopping Around for the Best Interest Rate

Credit card rates and terms vary greatly. Financial publications and the Internet are good sources to find the best credit card options. If you already have a major credit card, discuss rates with your card issuer. In many instances, customers in good standing can negotiate lower rates.

2. Choosing a Card for the Wrong Reasons

Some credit card holders choose a card to earn free airline miles or cash rebates — without regard to the card’s annual fee or interest rate. In the end, they may end up paying more in fees and interest than the value of the benefits they receive. Mileage and rebate cards might make sense for those who pay their balance in full each month, but if you don’t, there’s a good chance you’re better off with a no-fee, low interest rate card.

3. Being Misled by Introductory Rates

Watch out for credit cards with low initial “teaser” rates that increase significantly after a few months. Be aware, too, that sometimes the low initial rate applies only to balances you transfer from an existing card — and not to new purchases.

4. Not Reading the Small Print

Before you sign up, be sure you know the card’s interest rate and how it is calculated, the grace period, fee schedule, and other terms. Once your card is activated, your credit card company is obligated to notify you of any changes in the terms of your account. Be sure to carefully read this information. If you don’t like the terms, look for a new lender.

5. Paying Just the Minimum Payment Due

When you pay just the minimum due on your credit card, you’re stretching out the repayment period and adding to your overall interest cost. Each month, you should allocate as much as you possibly can to more quickly pay down your credit card debt.

6. Taking Cash Advances

Plan ahead and avoid using your credit card for quick cash at a cash machine. Cash advances often come with high service fees and higher interest rates. To make matters worse, your payments may be applied first to your lower-interest balance.

7. Being Late with Payments

Credit card companies charge a late fee — which could be as high as $30 — even if you’re just one day late. To be sure your payment arrives on time, mail it at least 10 days in advance. Some issuers allow you to make last-minute credit card payments by phone or via overnight delivery service. You’ll pay a fee, but it’s likely to be considerably less than a late payment fee.

8. Having Too Many Credit Cards

There’s little reason to have more than two national credit cards. If you have credit cards you no longer use, contact the issuer and arrange to close the account. Too many open credit cards — even if they have zero balances — may cause a lender evaluating your mortgage or other loan application to question what would happen if you ran up balances on all of them.

9. Not Checking Your Monthly Statement

If you spot a problem, immediately notify your card issuer by phone and follow up with written correspondence. Be sure to send your note to the address for billing complaints (which may be different from the address to which you send your payments).

10. Not Valuing Your Credit

A good credit rating is essential. Make every effort to keep your credit record clean.

According to CPAs, perhaps the biggest mistake of all is waiting too long to seek help if you are deeply in debt. If you need advice about managing your credit card debt, a CPA can help.

The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at

Lifetime Financial Planning, Inc.

Dean Knepper, CPA, CERTIFIED FINANCIAL PLANNER™ professional

2325 Dulles Corner Boulevard, Suite 500, Herndon, Virginia, 20171

208 South King Street, Suite 201, Leesburg, Virginia, 20175

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