Understanding Your Credit Card Statement
Each month millions of people across the country never really take heed of that little packet, sometimes multiple packets, stashed within their pile of mail – with the other junk, letters, and bills. Many of us have been receiving these gems since the age of eighteen and dutifully opening them, writing a check, and mailing a payment back without ever giving the process a second thought or glance.
But what do you know about that little packet – that credit card statement? If you ever wondered what all the different parts to the credit card statement meant – or what they are – then keep reading. We will break down and explain the credit card statement – that little monthly packet of joy. Let’s get started.
WHAT IS A CREDIT CARD STATEMENT?
Simply stated, a credit card statement is a monthly overview of all the activity – charges, interest, other activities – associated with that specific credit card for the prior month, also known as the billing cycle. Let us now take a deeper look at the dreaded credit card statement.
What are the important components of the credit card statement?
Your credit card statement is composed of several parts, providing you with some important information. Those parts include but are not limited to:
- An account summary
- A statement balance
- The grace period deadline
- The available credit
- A list of the most recent transactions
- The minimum payment amount due
- A minimum payment warning
- And total reward points earned (if a part of your credit card benefits)
These parts and others will be explained in greater depth in the next section. But first a quick explanation as to why you receive a credit card statement.
Why do you get a credit card statement?
The primary reason we receive this monthly document simply stated is that the credit card company wants their money. This makes a very good reminder to you that you have a financial responsibility to meet.
However, another reason is that this statement is a very useful tool to help you monitor some of your expenses, to be able to adjust your budget, and even help you monitor your credit indirectly by seeing fraudulent charges. With that being said, let us move on to a deeper look at the actual parts of the credit card statement.
PARTS OF YOUR CREDIT CARD STATEMENT
Credit card statements provide an individual with a plethora of information. And that information can be very confusing at first glance. The following sections will break down that information into more manageable chucks and hopefully clear up any confusion.
Payment Information
The Payment Information section of your credit card statement contains a lot of information including the current balance of your card, the minimum payment due, the date that the minimum payment is due, and a minimum payment warning – which details how long it will take to pay off the current balance only making the minimum payment.
Account Summary
The Account Summary section of your credit card statement explains how the credit card company calculates the current balance of the credit card. This section is not to be confused with the Account Information section which will be described next.
Account Information
The Account Information section of your credit card statement is kind of important. This section lists any legal disclosures, calculation information, and what to do if you find an error on your statement.
Rewards Summary
The Rewards Summary, if rewards are part of your credit card, of your credit card statement details the how and where any rewards you may have earned came from and on what they can be used.
Payments and Credits
The Payments and Credits section of your credit card statement lists all the payments you have previously made that have been applied to the balance of the card. It also lists any refunds credited back to your account – for example if you returned a purchased item.
New Charges
The New Charges section of your credit card statement lists all the new purchases you have made during the current billing cycle. Many times, it will also list the date of each purchase and the retailer.
Interest Charges
The Interest Charges section of your credit card statement provides you with the total fees and interest year-to-date, as well as the calculation for the interest charged during the current billing cycle. It will also list the different balance types such as purchases, cash advances, balance transfers and the like. Finally, this section lists any applicable annual percentage rates.
ADDITIONAL PARTS OF YOUR CREDIT CARD STATEMENT
To stay on top of your finances and to keep your credit is good shape, you should look for these following items which will be listed in the various sections that have been detailed above.
Previous Balance
The Previous Balance portion of your credit card statement is how much money was owed at the end of the previous billing cycle. Keep in mind that this amount gets carried over to the current month and you may have to do a little math to tease out the previous balance, current balance, and total balance from each other.
Notice of Changes
The Notice of Changes portion of your credit card statement is very important. This section details any changes, up or down, to the interest rate attached to your credit card. Usually, the credit card company will put this on the statement that is 45 days earlier than the proposed change. So, you really must read your statement and keep an eye out for any changes.
Fees
The Fees portion of your credit card statement will list all fees or charges you may have incurred during the current billing cycle. These fees can include annual fees, late fees, overlimit fees, balance transfer fees, cash advance fees, and/or foregoing transaction fees.
Credit Limit
The Credit Limit portion of your credit card statement is straightforward and simple. This details the maximum amount of credit afforded to you by the credit card company. It’s how much you can spend, not just for that month but in total. While all of these are important, next we will review some other points to be on the look at for on your monthly statement.
LOOK FOR THESE ON YOUR MONTHLY CREDIT CARD STATEMENT
Fraudulent Charges
Obviously, this is not a defined section, however, it is very good practice to get into reviewing your statement each month and verifying each purchase. This goes a long way to not only protecting your finances but your credit score as well. With identity theft being so prevalent, a few minutes spent at the end of the month reviewing your charges can have a tremendous impact on providing you serious peace of mind.
Due Dates
Identifying the exact payment due date on your credit card statement is critical. Knowing when your payment is due can help you plan and manage your money and go a long way in keeping you on track. A good trick is to write on the outside of the statement envelop in big letters the date that your payment must be mailed and/or made.
Spending Patterns
Your credit card statement will often list for you all your purchases for that billing cycle. This is great information to review and not just to be sure that there are not any fraudulent charges. It is a great way to compare your monthly spending with your monthly budget and make adjustments as needed to either.
Fee Changes
Finding the information about changes in the fees the credit card company is charging you is vital. Many times, credit card companies will issue a card with 0% interest for a limited time frame and then the interest goes up dramatically! You want to be sure you know exactly what the interest is and will be because no one enjoys surprise fee hikes. The above sections have described what is a monthly credit card statement. But what about the end of year statement? We look into those in the following sections.
UNDERSTANDING YOUR YEAR-END STATEMENT SUMMARY
The year-end statement contains similar parts to a monthly statement however in broader terms since it is a compilation of a twelve months of data.
Account Information
Well, you have had a whole year of spending and making payments and you just received your year-end statement, now what? The first thing to do is to check out the Account Information listed. It will usually list the name, address, and phone number that relates to the account, along with the last four digits of the account number. You’ll want to make sure this information is correct and is yours!
Year End Summary Statement
Now for the potentially scary section, the Year-End Summary. This section is the compiled totals of your purchases’ amounts, cash advances amounts, and balance transfer amounts. However, keep in mind, that this section may not reflect your actual current balance since you may have been carrying a balance from previous years.
Transactions Overview
The Transactions Overview section can be a real eye opener for people who rely heavily on their credit card for making purchases and paying bills and other expenses. This section lists all of your purchases of the past twelve months and can be a critical tool in helping to manage and maintain your finances. With this section you can see spending patterns and thus can compare those patterns to your budget.
FINAL COMMENT
Monthly credit card statements are not just necessary evils that we all must contend with to function in modern society. Yes, they represent certain financial obligations we must take care of, but they also can be very useful financial tools. The information they provide can be used to adjust and maintain monthly budgets, they can help protect against identity theft and fraudulent charges, and help us stay on top of our credit. When used responsibly credit cards can improve our daily lives. The also provide an opportunity for us to learn how to handle our money more responsibly. So, take a few extra minutes each month to really read and understand those monthly credit card statements.
