How to read and understand a credit card statement
While not the most interesting reading material, your credit card statement is something you’ll want to make a habit of checking on a monthly basis.
Why? Because credit card statements are the fastest way to get all the essential details about your next credit card bill.
They provide details of your card balance, minimum payment, interest payments and more. Credit card statements are also one of the easiest ways to make sure you’re on track to meet your financial goals and won’t have any nasty surprises when your credit card payment finally comes through. due at the end of your billing cycle.
So how can you check your monthly statement without making it an hour-long process? Here’s everything you need to know to effectively scan your credit card statement each month.
What is a monthly statement?
The monthly statement is sent by mail or electronically and includes a breakdown of any new charges to your account (such as any recent purchases you’ve made) as well as information about your outstanding balance, minimum payment and payment charges. ‘interest. Your monthly statement is one of the best ways to check and manage your credit card activity. Think of it as a prerequisite to your credit card bill that provides an overall summary of your credit card balance and payment schedule.
What’s on my credit card statement?
In addition to providing an overview of your credit card account, a credit card statement will also show a few key things, such as a list of all charges you incurred during the last billing cycle (such as late payment fees or foreign transaction fees), as well as details of your previous balance and the last payment you made.
These statements will also help you track the amount of your available line of credit based on your current monthly balance. Since credit usage is a key aspect of building your credit score, it should be noted each time you receive a monthly credit card statement.
Your credit card statement also shows your minimum required monthly payment with respect to your overall balance. Although you don’t have to pay your balance in full each month, it will save you money on interest charges, as these only kick in when you have an outstanding balance on your card. of the previous month.
If you receive a minimum payment warning and ignore it, your account could be closed for non-payment and/or turned over to a collection agency.
Glossary of credit card statement terms
Your account summary is pretty much what it looks like – an overview of your credit card statement for that payment period (which usually lasts about a month). It will include details of how much you have used your credit card during this period as well as how much you owe. It may not include everything listed below (or may have those items listed in a different order), but it will generally contain details of most of the following:
- Account number: This is your credit card number. You will need this number to identify yourself each time you contact your bank or credit card issuer.
- Account activity: This section of your credit card statement lists all transactions made during your current billing cycle, including the amount of your purchases and details about the merchant you purchased from. Some card issuers even assign a reference number to each purchase, making it easy to reference if you have questions later (like if you think you’ve been the victim of fraud or identity theft).
- Payments: These are all previous payments you have made on your credit card balance. If you pay off your card in full each month, this number will be your “previous balance”.
- Credits: This is often grouped together with your payments and refers to all credits (i.e. deposits) made to your account. Credits occur if your credit card issuer owes you money or if you return an item and receive a refund to your credit card.
- Purchases: This number reflects the total dollar amount of all purchases you have made during your current billing cycle.
- Balance transfers: If your credit card allows balance transfers, the total dollar amount of any balance transfers made during your current billing cycle will be shown here.
- Cash advances: This reflects the total dollar amount of any cash advances you have withdrawn from your account during the current billing cycle. Not all cards allow this, so it may not appear on your statement.
- Costs: If you’ve been charged fees (like late payment fees, foreign transaction fees, or even annual fees), they’ll appear in this category as part of your total balance owing.
- Interest charges: Anytime you carry a balance on your credit card for more than one billing cycle, you incur interest charges (you may even be liable for what’s called residual interest). These fees vary widely based on your credit score (those with higher credit scores tend to qualify for cards with lower interest rates, among other benefits).
- New balance: This reflects your current balance owing for your account. Keep in mind that this number may include your previous balance (if it hasn’t been paid in full) as well as any new fees or charges you incurred during your current billing cycle.
- Credit available: Your available credit corresponds to the amount of your line of credit that is still available to you. For example, if you have a line of credit of $5,000 and your current balance is $2,000, you have available credit of $3,000.
- Cash Access Line: For credit cards that allow cash advances, this will tell you how much you are allowed to borrow.
- Opening/closing date: Here you will find the first and last day of your billing cycle. Purchases made before or after these dates will appear on your previous (or future) credit card statements.
- Days in billing cycle: This tells you exactly how long your billing cycle is, which is usually around 30 days.
This part of your credit card statement will provide details of the amount you owe during this billing cycle. Here are some of the key terms you’re likely to see:
- Current statement balance: Although it is also listed elsewhere on your statement, card issuers tend to list it at least twice to ensure you see it. This number is synonymous with your “new balance” and reflects the amount you currently owe on your account, and includes any previously unpaid balances, as well as any new purchases, interest charges or fees from your current billing cycle.
- Minimum payment due: This is the minimum dollar amount you will need to pay by the due date shown to avoid paying late fees. Minimum payments are calculated differently depending on your card issuer’s policies as well as your current balance and interest rates. Most banks typically charge either a flat rate (like $25) for balances under $1,000 or a percentage (usually around 2%) for balances over $1,000. Some banks will also calculate your minimum payment by adding the interest charges you owe plus 1% of your current balance. It’s generally a good idea to pay more than your minimum balance to avoid ending up with credit card debt.
- Minimum Payout Warning: This section of your statement includes a chart that tells you how long it would take to pay off your balance (usually several years) if you continued to make only minimum payments (and not charge new fees to your card ).
- Late payment warnings: This disclaimer reflects the maximum dollar amount you could be charged if you do not pay your credit card bill on time. Although banks don’t usually charge this full amount for first-time offenders, they may well do for later late payments.
If your card has a rewards program, you will find full details of your rewards balance in this section of your credit card statement.
- Balance of previous rewards: This reflects your rewards balance prior to your current billing cycle.
- Awards earned this month: This number tells you how many rewards you have earned during your current billing cycle.
- Bonus Rewards: If your card offers bonus rewards in certain categories and you have recently qualified for those bonus rewards, they will be listed here.
- Total rewards available: This reflects the number of rewards available to use at this time. Because some banks take longer than others to process rewards, this number may not include all of the rewards you’ve earned during the current billing cycle.
Frequently Asked Questions (FAQ) About Credit Card Statements
How to read credit card statements?
If this is your first time reading a credit card statement, you’ll want to focus on two things: your account summary and payment information. These two sections of your statement will show you your current balance, minimum payment required, and more specific details about your account activity.
What does a credit card statement show?
A credit card statement is a summary that contains everything you need to know about your credit card’s financial status. It shows your balance, payment due date and minimum payment required, available line of credit, interest charges, fees, and even a list of your recent transactions. It will also contain the company’s contact information if you have any questions. Remember that purchases made after the billing cycle close date will not appear on the statement, which means you may owe more.
What happens if I pay less than the minimum?
Paying less than the required minimum payment shown on your credit card statement will generally result in a charge. You should check your credit card agreement for details of charges, and also try to pay above minimum payments where possible, as missing payments or only making minimum payments can quickly lead to debt. credit card.
What happens if I pay my bill late?
Paying your credit card bill late will likely result in charges and may even cause your interest rate to increase. Some lenders apply an APR penalty to your account if it’s been 60 or more days without a payment. If you miss paying the bill during this time, the account could be closed or sent to a collection agency.
Contributor Larissa Runkle writes frequently on finance, real estate and lifestyle topics for The Penny Hoarder.