It arrives in your mailbox or in the post every month. You may not even glance at it. We're talking credit card statements.
You probably don't want to spend time reviewing your credit card statement. If you know what to look out for, it's a great way to monitor your account and spot potential problems.
What you need to know about your own.
What is a Credit Card statement?
Credit card statements are a summary of all financial transactions, interest and fees associated with the credit card account for a particular billing period. These statements are typically generated and sent to cardholders by credit card issuers every month. Consumer Financial Protection Bureau requires that card issuers send statements to you at least 21 calendar days before the due date for your minimum payment.
Kendall Meade is a certified financial advisor at SoFi. She says that it's important to check your credit card statement to ensure all charges are correct. She says it is also important to understand and review the balances, including the interest charges. The goal is to pay your balance off every month, so you don't have to pay any interest.
How to Read Your Credit Card Statement
You will find the following information at the top of your statement:
You will see your legal name. This is the address you have on file and where you receive paper statements if you didn't opt in to e-statements. Account number. These two dates, also known as statement periods, represent the most recent period of time that your statement represents.
Your credit card statement begins with an account summary. This is what it says - a summary that includes the most relevant details about your account. You can find information like:
Previous balance. Payments and credits: You'll find any payments made towards the previous balance as well as any credits you have on your account. Statement balance: This balance includes any previous balances, current charges, fees, and credits. According to Meade, the balance of your credit card must be paid in full to avoid interest charges.
Total credit line, and credit available. You can also see how much credit is available on your card. The credit limit is the maximum amount of credit that you can borrow with your card. Available credit is the balance remaining after subtracting the statement from the total limit.
This section only shows transaction data from the current billing period. If you charge a credit card purchase the day after the billing period closed, it won't appear on your statement until the next month. Logging into your account online will allow you to view a summary of your account in real time.
This section contains information about the payment for the current month, such as the minimum payment amount and the due date. Bhatt says that the minimum payment is the amount you must pay by the due date in order to avoid penalties. You will be fined if you pay a partial amount that does not meet the minimum or if you skip the payment.
Due to the CARD Act of 2009, all credit card companies are required to include a warning about late payments in this section. This section explains the penalties that you will incur if your minimum payment is not made. You will also see a warning about minimum payments that will explain how long it will take you to pay your balance off if you make only the minimum payment. It will also tell you how much interest will be charged.
Paying more than the minimum is the best way to avoid interest charges on your account. If possible, pay the full balance. If you pay off your entire balance every month, you won't have to pay any extra for your purchases.
This section is perforated and contains the necessary information to pay your invoice. This section will be needed if you are paying your credit card by mail. You must tear it off and attach it to your check to ensure that your payment is processed quickly. Payment coupons also include a box where you can indicate if your home address has changed. To notify the issuer, you can write your new address at the back of your coupon. You can update your address online if you don't want to use the coupon and pay online.
Your transaction history is probably the most important part of your statement. The transaction history is a list of each transaction you made in the period covered by the statement, listed chronologically. Each transaction includes the dollar amount, date of transaction and name of merchant. Some card issuers will also provide a reference number with each transaction. You can use this number to contact the issuer if you have any questions about a particular charge.
You should review this list every month to ensure there are no errors or fraud.
Fees and Interest Charges
The box will detail the fees and interest that have been charged to your account. This section shows the total amount of fees and interest charged to your account during the statement period as well as the year-to date totals. This box will display $0. If you have not incurred any fees or interests, it will be displayed as 0.
The next section explains the interest calculation and how it was applied to your account. The annual percentage rates are divided by purchases, cash advances and balance transfers, as the interest rate charged for each type of transaction is different.
Key Points Summary
You can find out more about your rewards credit card here. You may also be able see the previous rewards balance from the last billing period, the rewards you have accumulated in the current billing period, the bonus points that were awarded, and the total rewards available. Any rewards you earn after the billing period has ended will appear on your next statement.
The Key Terms You Need to Know
Understand all terms once you have mastered how to navigate through your credit card statement. Understanding these terms will allow you to avoid any unnecessary charges and mistakes.
Addition cardholder: An authorized user or joint cardholder is someone who you added to your account. They are authorized to make purchases. Add only trusted family and friends as additional cardholders.
Annual fee: Some card issuers charge an annual fee for the use of their cards, particularly if they offer a lot of rewards. This fee is separate from the rate of interest on purchases. The annual fee may be waived for the first year of your account.
APR: Annual percentage rate is the interest that you will pay for carrying a monthly balance. It is expressed as a percentage.
Available credit: This is the amount of credit you can use from your total credit limit. This can vary from month to month.
Balance transfer: When you move the balance of one or more credit cards to another card. Issuers often offer introductory APRs that are low or even zero for balance transfers. However, balance transfers can sometimes be subject to a fee - usually around 3% of transferred balance.
Billing cycle: The period of dates is used to calculate the minimum payment. This is the time period that your statement covers, usually between 25 and 31 days.
Cash advance: A cash advance is borrowing cash from your credit line. This type of transaction usually has a higher APR than regular purchases and will also reduce your credit available.
Chargeback: When you dispute an item on your credit card statement, and request a reimbursement from the merchant. Chargebacks are intended to protect consumers against fraudulent or unauthorized transactions as well as merchants that fail to deliver the goods or services they promised.
Credit limit: The maximum credit line you can access is your credit limit. Your credit limit will not change until your issuer approves an increase or decrease.
Credit score: A credit score is a number of three digits that indicates your likelihood to pay your debts in full based on the history you have. Most credit card companies provide you with your VantageScore or FICO score monthly for free.
Due date: The date on which you must pay the credit card company. You could be charged late fees if you do not make your payment on time. You may also be charged a penalty APR depending on the lateness of your payment.
Grace period: This is the period of time during which you can pay your credit card bills without paying interest. This is usually only applicable to new transactions. You can still charge your purchases to your credit card without incurring interest.
Interest charged: The amount you pay in dollars to carry a balance.
You will be charged a late payment fee if you fail to pay your minimum monthly payment by the due dates. Late fees can range from $25 to $40.
Minimum payment: A minimum payment is the amount that must be paid to cover the current statement of account and avoid late fees.
If you miss or are late with a payment your card issuer can charge a penalty APR. You must, however, be 60 days past due to receive this penalty.
Previous balance: The total balance of your card at the time of the previous billing cycle.
Statement balance: Your balance at the end of your most recent billing cycle. Statement balance: This is your balance as of the closing date of your most recent billing period.
How long should you keep your credit card statements?
Keep your credit card statement for at least 60-days. This is the time limit for sending a written notice to the credit card issuer if you discover any billing errors that require the issuer to correct them.
You may want to keep your statement for 90 days if you are disputing any charges. It takes approximately two billing cycles to resolve a dispute, but no longer than 90 calendar days after the creditor has received notice.
Keep your statements for one year if you rely on them to reconcile or track your spending. After a period of one year, statements that don't relate to ongoing disputes or unresolved matters can be thrown away.
You should also keep any credit card statements you use to support deductions on your tax return for at least six years. The IRS audits tax return up to six years in the past.
Meade says that most people can access these statements online, so they don't need to be kept on paper.
It may seem tedious to review your credit card statement, but it is the best way to avoid bigger problems that can be caused by fraud and errors. Early detection of problems not only saves you time, but also protects the money that you've worked so hard to earn.