How to Read Your Monthly Credit Card Statement
It is a day most people look forward to with the same anticipation as the possibility
of an audit by the Internal Revenue Service: the day your credit card statement arrives. Like all duties in life, however, these bills must be paid to avoid even greater troubles. Therefore, in the interest of making this small part of life less frustrating, this guide to understanding the bewildering jumble of numbers that is the credit card monthly statement.
A certain part of your monthly statements provide basic information about your account, including your account number, balance, and credit available. The account number, though an uncomfortably long number to deal with, is not something to be concerned with; it is nothing but an identification code. When it comes to balance and credit limit information, on the other hand, there are several values given which must be kept straight.
One of the more important numbers to note is the "new balance." This is the balance due after any charges or payments made in the last billing cycle (the cycle that ended with the printing of the statement you are reading), and as such is a summary of the more detailed transaction information itemized on the statement. You may also see a value called the "previous balance," which would have been the "new balance" on your previous statement. Your previous balance is the balance you started the billing cycle to which this statement refers with, that is, the starting point from which you arrive at your new balance after adjustments for activity in the last billing cycle.
Two values will be given regarding your credit line: your total credit and your available credit. Your total credit is the total amount which can be charged against your account at any time (also known as your credit limit). In contrast, your available credit is the amount of your total credit you have remaining after your current balance is subtracted.
Your statement also must provide you with information regarding how to pay your bill, such as the minimum payment due, the address to which to send payment, the payment due date and the name to which to make the check payable. Your minimum payment can be determined by a number of means, all of which are based on the balance you owe. It is always wise to have your check in the mail with at least a week to spare to give time for the check to arrive at its destination; though some credit card companies offer a grace period before late fees are due, there is no purpose in delay at the risk of a late fee.
A great deal of data is given regarding the activity in your last billing cycle, which therefore must be read carefully. Each transaction is associated with not one, but two different dates: the transaction date is the day you actually made the transaction, while the posting date is the day the transaction was posted to the account, generally a few days after the transaction date. The reference number assigned each transaction is an identification code used to track transactions. If you have some concern regarding a transaction, this number will be used by the customer support representative to look into the details of this transaction.
Each transaction listed on a statement is given a brief description, which is meant to be more intelligible to the customer than the cryptic reference number. Finally, the amount of each charge or credit is listed; these can be listed in one column or two depending on the credit company. If one column is used for both credits and charges, credits will be listed with a minus sign. If you earn any benefits with a certain card, such as airline or cash back rewards, these will be listed in another column.
Payments and credits, purchases made, cash advances, and finance charges will appear on the statement in different columns. Purchases are listed in the billing cycle during which the purchase was posted rather than the cycle in which the transaction was made in the case that a transaction is made at the end of a billing cycle. Charges listed under cash advances can include ATM cash withdrawals as well as balance transfers.
Associated with any credit card is an annual percentage rate (APR) of interest, though individual transactions on an account statement may be listed with a daily periodic rate which is found by dividing the APR by the number of days in a year. The interest rate charged to a particular transaction depends on the type of transaction it is: cash advances typically carry the highest interest and balance transfers the lowest. Your finance charge is found by applying the interest rates of each respective category to the balance in each category, listed as the "balance subject to finance charges."
Other information provided on a monthly statement includes information for contacting customer support for your credit card, and information given in fine print on the reverse side of the statement which is required by law. Such detailed information includes a listing of the terms, policies, and conditions associated with the credit card, as well as your rights as a cardholder.
While reading your monthly statements may seem like decoding the Dead Sea Scrolls, the information contained therein can be of great value. After all, it can be said that what you get out of a task equals what you put into it; by reading your statements with care you may be better prepared to navigate the stormy waters of credit.
How to Read Your Monthly Credit Card Statement
By: Pamella Neely
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