You get it in the mail or your inbox every month, yet you may barely read it. Yes, we’re talking about your credit card statement.
Reviewing your credit card statement is likely one of the last things you want to do with your time. However, if you learn what to look for, it can be an easy way to keep tabs on your account and catch potential problems early.
Here’s what you should know about reading your credit card statement.
What to Look for on Your Credit Card Statement
Account information: At the very top of your statement, you will often find your account information, including the account number, the account opening date and the dates covered in this statement period.
Account summary: Next, you’ll see a box called “account summary.” This is exactly what it sounds like — a summary of the most important details related to your account. Here, you can see information such as your balance as of your last statement, your current balance, any credits or fees added to your account, interest accrued and more.
“You can easily keep track and verify that your finances are in order by simply checking the account summary located on your statement,” says Natasha Rachel Smith, personal finance expert for cash-back website TopCashback.com.
Note that this section will only show transaction information from the current billing cycle. So if you charged a purchase to your credit card the day after the billing cycle closed, you won’t see it reflected in your statement until the following month. You can, however, log in to your account online to see a real-time summary of your credit card account.
Payment information: In this section, you can see the information related to the current month’s payment, including the minimum payment and due date.
“One of the main responsibilities that come with paying with credit is that you’ll be required to pay a minimum amount each month toward your balance and interest,” says Smith. In order to avoid late fees and penalties, you’ll need to pay this minimum by the due date. “If you make a partial payment that doesn’t total the minimum payment by the due date, you could be fined,” Smith adds.
[Read: The Best Rewards Credit Cards of 2018.]
The payment information section will include a late payment warning, which all credit card issuers are required to include on statements, thanks to the 2009 CARD Act. This section details the fees that will be applied if you do miss your minimum payment. Additionally, you will see how much longer it will take to pay off your balance if you only make the minimum payment, as well as how much interest you’ll pay.
If you want to avoid paying interest on your balance, it’s best to pay more than the minimum — and the entire balance, if possible. Paying off your balance in full every month means you’ll never have to pay extra on your purchases.
Credit line: Below your payment information are facts related to your line of credit. Here you can see how much total credit is extended to you, as well as how much of your credit is available. Note that interest and fees, in addition to purchases and cash advances, will reduce your total credit available.
“You never want to spend all the available credit, because it will negatively impact your credit report,” says Smith. “To prevent your credit score’s health from deteriorating, try to borrow less than 30 percent of your credit line amount.”
Points or rewards summary: If you’re using a rewards credit card that allows you to earn points, miles, cash back or other rewards, you’ll find the details here.
Like the account summary, you will be able to see how many points you earned during that billing cycle. Any rewards earned after the billing cycle closed will be reflected on your next statement.
Credit counseling statement: If you aren’t able to cover your entire bill, sometimes it’s a good idea to call your card issuer and find out if you can work out a temporary reduced annual percentage rate or payment plan.
However, if you’re experiencing an ongoing issue with credit card debt and need a more in-depth, long-term solution, it’s best to contact a credit counseling agency. Credit card issuers are required to provide the contact information for a nonprofit credit counseling agency on every statement.
Important changes to your account: If any changes were made to your credit card account, such as a new APR, a special line item will be included near the top of your statement detailing the changes and date they become effective.
Payment coupon: If you pay your credit card bill by check in the mail, you will need to include the payment coupon. This tear-off section of your statement includes all the necessary details for your payment to be processed quickly.
The payment coupon also includes a check box to mark off if your address has changed. You can list your new address on the back of the coupon to notify your issuer.
[Read: The Best No-Annual-Fee Credit Cards of 2018.]
If you pay your account online and don’t use the coupon, you can usually update your address online as well.
Transaction history: The meatiest section of your credit card statement may be your transaction history.
“Here you’ll see all the transactions you made during the statement period, including the date of the transaction, the type of transaction and the amount,” says Smith. She adds that it is a good idea to skim through this list of transactions every month and make sure there aren’t any errors or fraudulent activity.
Fees and interest: After the chronological list of your transactions, there will be a box detailing the amount of fees and interest charged to your account, if applicable. This section will show the amount charged during the statement period, as well as year-to-date. If you did not incur any fees or interest, this box will show $0.
Interest calculation: Next is a section that explains how interest was calculated and applied to your account. APRs are broken out by transactions, balance transfers and cash advances, since the amount of interest charged usually varies for these different types of transactions.
Rewards summary: For rewards cards, the last part of the statement will break down how those rewards were earned and calculated during the statement period. You will be able to see how many rewards you have available to redeem, if any.
The fine print: Finally, your statement will include any disclosures related to your account and other important instructions, such as how to mail a payment, how to dispute a charge and what to do if your card is lost or stolen.
Key Terms to Know
Once you know how to navigate your credit card statement, be sure you understand all the terms on it. Knowing these key terms will help you avoid unnecessary fees and other mistakes that could cost you.
Additional cardholder: A joint cardholder or authorized user is someone you have added to your account and is authorized to make purchases. Only trusted family members and friends should be added as additional cardholders.
Annual fee: Some issuers charge a yearly fee to use the card, especially for cards that offer particularly lucrative rewards. “This is a separate fee from the interest rate on purchases,” says Smith. Often, you can get the annual fee waived the first year you have the account.
Annual percentage rate: The APR represents how much interest you will be charged for carrying a balance month over month, expressed as a yearly percentage.
Available credit: Your available credit is how much of your total credit limit you have available to use. This often varies month to month.
Balance transfer: This occurs when you move the outstanding balance from one or more cards to a different card. Often, issuers will entice new customers by offering an introductory low or no APR on balance transfers from other credit card companies. Balance transfers sometimes do require a fee, however — typically about 3 percent of the balance.
[Read: The Best Starter Cards for Building Your Credit.]
Billing cycle: This is the span of dates used to calculate your minimum payment due. It’s the period of time your statement covers — usually 25 to 31 days.
Cash advance: Borrowing cash from your line of credit is known as a cash advance. The APR is usually higher for this type of transaction versus regular purchases, and it will reduce your available credit just the same.
Chargeback: According to Smith, “A credit card chargeback occurs when a refund takes place, which means the merchant is refunding a transaction amount to your credit card account.” Chargebacks also occur when you dispute a transaction.
Credit limit: Your credit limit is the maximum line of credit you have available. Your credit limit does not change unless your issuer grants an increase or decrease.
Credit score: “A credit score is a three-digit number that sums up your credit history. Your credit score is used to gauge your creditworthiness and risk level,” says Smith. Many credit card issuers provide your monthly FICO credit score for free.
Due date: This is the date your payment is due to the credit card company. If you fail to make your payment by this date, you could be charged a late fee. Depending on how late your payment is, you might also be subject to a penalty APR.
Grace period: The grace period is the time you are allowed to pay your credit card bill without having to pay interest. This usually applies to new transactions. So, you can charge items to your credit without accruing interest until after the grace period.
Interest charged: This refers to how much you are being charged for holding your balance. For example, “Instead of just illustrating 10 percent, it spells out that you were charged $100 on your $1,000 balance,” says Ash Exantus, director of financial education for digital bank BankMobile.
Late payment fee: This is a fee you must pay if you miss your monthly minimum payment by the due date. Late fees vary between $25 to $35.
Minimum payment: The minimum payment is the smallest required amount to satisfy the current billing statement and avoid any late fees.
Penalty APR: If you are late or miss a payment, your card issuer may charge a higher penalty APR. However, you must be at least 60 days delinquent to be hit with this penalty.
Previous balance: This is the total balance on your card at the end of your previous billing cycle. Exantus says, “It gives you your current starting point for this month’s statement.”
Statement balance: This is your balance as of the closing of the most recent billing period. Your statement balance could be different from your current balance.
Even though reviewing your credit card statement might seem boring, it’s the most effective way to prevent bigger problems caused by errors and fraud. Catching issues early not only saves your precious time — it protects your hard-earned money, too.
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How to Read (and Understand) Your Credit Card Statement originally appeared on usnews.com
