Opening, Studying and Learning from Your Credit Card Statement.
Are you like I was when I received the monthly credit card statement? I would automatically have this emotional response going into to a fit of anxiety, followed quickly by apprehension, then denial that the statement envelope even came. It would lay on my desk unopened. I would even play mind games by covering it up with other paperwork denying it existence. Eventually I had to face the reality forced on me by knowing the “pay by date” and just open the envelope and the only thing I’d looked at was the amount owed.
Years later I learned to actually read the statement. I mean read it from top to bottom each month learning the language that it contained. I found the language combined with the numbers gave me an eye opening look into the world of my financial situation. I eventually became less apprehensive and intimidated by the statements and felt more empowered as I learned to use the tools provided within them to take back control of my debt and pay the balance off faster.
By leaving the statement unopened, I missed out on the opportunity to tap into the information that would help me to conquer my debt. Opening, studying and learning from your credit card statement can empower you to conquer your debt. If you’re anything like I was, then let’s face those fears. In this post we will help you to decode the information in the credit card statement in a way that will allow you to take back control of your finances.
Ideally, you’ll review this document each month, so you should know what information your statement contains and to what items you should to pay attention. Credit Card companies have made a real effort in the past few years to make their statements clear and easy to read and since laws requiring lenders to explain and show you how much in DOLLARS, not just in percent, your credit is costing you. Look for that important section titled, “MINIMUM PAYMENT WARNING”.
Billing Cycle Opening and Closing Dates: Statements are sent monthly or quarterly. Locate the dates on the statement to confirm the timeline you’re evaluating which are the beginning date and the ending date of the charges you made for this statement.
Payment Due Date: The date by which you must pay your next bill. If not paid by this date, you will incur a late fee. This is the date to put in your calendar. It’s also helpful to set an email reminder a few days prior as a way to alert yourself to an upcoming due date.
Interest rates: Although this usually appears somewhere at the bottom of the page, perhaps hoping you wont look that far into the statement; I wanted it to put in the top of the list of things of your checklist. You may already be familiar with your interest rates, but it’s never a bad idea to check them. Credit card companies routinely check your credit score and will raise your rate without any special notification to you if your credit score goes down. Make sure you’re looking for your current interest rates and not at potential offers inserted by the credit card company.
You can use interest rates as a bonus motivator to help you speed up your debt repayment. For credit cards, some interest rates can be as high as 48% which could translate to a lot of interest added to your debt over time and really motivate you to get the card paid off not be paying up to 48% more on what you bought, which I am sure you will agree is no bargain. We would never run to a store and buy something because it was on sale for 25% or 48% more than the usual asking price, yet are we running out and paying that when we charge and then pay interest. Avoid interest and save your money or spend it on buying what you want instead of giving it to the credit card company! HMMMMMM…Your savings account or the credit company’s account? Which do you choose? Your are your choices.
SUMMARY OF ACCOUNT ACTIVITY
Account Summary: Below is an example of and a simplification of each of the basic Summary Statement sections, as well as, an explanation on what you should focus. Remember, while all credit card statements have the same basic information, the data may be presented in a slightly different order depending on your card issuer.
Previous Balance: The balance on your loan at the end of the previous billing cycle. Our advice: Aim to pay off your entire balance, every month. This may not be possible for you right now, but this should be your ultimate goal when it comes to credit card usage. Credit card debt isn’t cheap debt, so try not to carry a balance.
Payments: What you have paid on your Previous Balance. Ideally you have paid the total Previous Balance and these two numbers will match.
Credits: If you have returned any purchases for credit or any disputes of charges have been made, they will appear here.
Purchases: What you have purchased since the beginning and closing of the Billing Cycle.
Cash Advances: What you have written those those handy, easy to spend, enticing checks that came with your credit card, or what cash amount have you withdrawn from and ATM machine with your credit card that was available from your credit cards Cash Access Line? BEWARE INTEREST CHARGED AT USUALLY AT A GREAT RATE THAN OTHER PURCHASES, A POSSIBLE FEE FOR EVEN USING THEM, AND INTEREST CHARGED FROM DAY OF USE. Looks like 3 strikes and they should be out of your choice of use.
Balance Transfers: If you used an offer to transfer other higher interest rate credit card balances to this lower rate interest card, that amount will be added here. Remember there may be extra fees charged for this transfer just as there are for cash advance fees. AS ALWAYS READ THOSE TRANSFER RULES.
Fees Charged: Late fees, over limit fees, transfer fees, and those nasty cash advance fees. Whether it’s a late fee or a monthly maintenance fee it’s important to know what extra charges you’re paying. To reduce these kinds of expenses, try negotiating these charges down or removing them entirely.
Interest Charged: This reflects the amount of interest accrued during the billing period. It’s calculated according to your interest rates and your principal balance. If you are under an agreement when opening a new account with a 0% APR for an agreed upon timeline, you will see no interest charges.
New Balance: (sometimes principal balance): This is the balance that remains to be paid. Ideally, you want to pay off the New Balance every month so that you avoid interest charges, which can only be avoided if your credit card agreement was to NOT CHARGE interest from day of purchase. Stay away from cards that charge interest from day of purchase because you cannot avoid interest charges with that type of agreement. Cash Advances are notorious for having interest from day of issue.
Opening/Closing Date: The beginning date and the ending date of the charges you made for this statement.
Credit Line or Limit: This number tells you the amount of credit that the credit card company has allowed you to have. It is the most amount that your Balance Due can be.
Available Credit: How much more you can spend with your credit card at the end of the current Billing Cycle Closing Date (discussed above). If the credit card company allows you to have a total of $1000.00 that you owe them including Previous and Current Purchases, and you owe them $700.00 for those Purchases, then you only have another $300.00 that you can charge till you lower that balance. ($1000.00 – $700.00 = $300.00)
Though you may have a high Credit Line Limit, you do not need to spend up to this limit on your credit card – in fact, you shouldn’t! It’s just the amount available to you. Using only half of your available credit line will increase your credit score, and that is a good thing.
IMPORTANT NOTE: Take a look at the amount of interest you were charged on the current month. If it was $50.00 interest, and it will probably be the same next month, remember that $50.00 is going to take away from the $300.00 available credit you have because that $50.00 will be added into what you owe next month. So if your Charge $300.00 because you thought that was you available credit and you owe $50.00 in interest, that puts you up to $350.00 and you will be charged and OVERT LIMIT FEE. Nice, Right?! Just another reason to use half or less of your available credit.
Cash Access Line: Some credit cards allow you to use a certain amount of your Credit Line to access by writing checks that they provide or allowing you to withdraw that amount from an ATM machine with your card. Here is where they list the total amount of cash that you can charge to your card.
Available for Cash: The balance of the Cash Access Line for which you can write a check or withdraw from and ATM.
Past Due Amount: You should know why you want to see this $0.00. You don’t want that $35.00+ late fee.
Balance over the Credit Limit: You should know why you want to see this $0.00. The fee for going over you credit limit can be a flat fee like $35.00 or could be a percentage of how much you are over your limit. UGH!
Days in Billing Cycle: This doesn’t appear in our particular sample above, but all credit card statements somewhere will indicate the number of days in the billing cycle. A month that has 31 days in it will charge you more interest than a month that has 30 days in it, and so on with one that has 29 days charging less interest than for 31 or 30 days, and a 28 day month will charge the least amount of interest.
This section tells you your current balance, the minimum payment due and the due date which are just as stated, and it also includes a Minimum Payment Warning.
“MINIMUM PAYMENT WARNING” shows you in black and white how many more $ you will actually eventually be paying for those items your purchased if you did not pay for them on the Due Date of the Statement when they were purchased.
Minimum Due: I put this in red, because I want to warn you to STOP doing this. This minimum payment will be mostly interest charges and very little on what you own on the balance of your purchases. It prolongs the time you are paying that monthly interest on your purchases, and some credit companies will calculate it to make it almost impossible to ever pay off your credit card. I’ll say it again. If you just pay the minimum payment, you could be paying almost all interest to the credit card company, while you are not paying off your purchases. If you want to pay off debt more quickly and put money in your pocket (and who doesn’t), you will make payments higher than this number if you can.
TRANSACTIONS, PAYMENTS AND CREDITS
Transactions (New Charges): This section is an exhaustive list of all the purchases you’ve made during this billing cycle. Of course your statement will show you the amount of the charge transactions you made, to what retailer, the date processed, and sometimes even more detail like the location, phone numbers and type of companies. Spend the time right here each month checking each of these transactions and be certain that you made them and their is not a fraudulent charge on your statement. If there is one you do not recognize, check into it and notify the credit card company. They will put a hold on it, notify the company to whom the charge was made of a dispute and give that company a time limit to respond. SEE CONTACT INFORMATION LATER BELOW.
Payments and Credits: This section lists the payments individually that were added together for the total payments number in the account summary. It also lists any credits. If you purchased something and returned it, for instance, the refund would be listed here, as well as it was in the account summary. Check thoroughly to make certain you have received credit for your payments and items returned.
OTHER IMPORTANT INFORMATION
Fees Charged: Although Total Fees were shown in the Account Summary, in this section most bank statements will show fees individually listed. As it was stated earlier, whether it’s a late fee or a monthly maintenance fee it’s important to know what extra charges you’re paying. To reduce these kinds of expenses, try negotiating these charges down or removing them entirely.
Rewards Summary: Here’s the fun stuff! This section will be on your statement if you have a rewards credit card, such as a cash-back or travel card. Some statements will detail where your points came from, while others simply state the rewards earned during the billing cycle. Our suggestion: Understand how your credit card’s rewards program works. Redeeming and enjoying rewards doesn’t matter for your credit score, but who doesn’t love cash and potentially free plane tickets?
Information About Your Account: This section contains legal disclosures, calculation information and instructions on how to deal with errors, among other things. Our suggestion: You don’t need to read this part of your statement every month, but go through it at least once to familiarize yourself with your credit card’s policies. You’ll learn potentially useful information, like how your payments are applied or how your balance is calculated.
Interest Charges: This section lists your total fees and interest year-to-date, as well as an interest charge calculation for this billing period. It generally lists out each balance type — purchases, cash advances and balance transfers — along with the applicable Annual Percentage Rates (APR), the balance subject to these rates and the subsequent interest charges. Our suggestion: Ideally, you won’t be accumulating interest, but check over this data to make sure it’s correct. Also, double check that you aren’t being charged any fees in error. You may have a card with an annual fee, which is fine, but you don’t want to accumulate late payment fees or the like.
Contact Information: Generally found in the top section or at the bottom of a statement, this information includes ways to contact and communicate with your bank or loan servicer. The website, 800 number, and mailing address is usually included. This information is helpful in that it directs you towards the first point of contact for questions or concerns.
Asterisks or symbols: Circle any asterisks or symbols! These symbols are important because they usually indicate a rule, regulation, or exception. You can usually find their corresponding meaning located in a key along the bottom of the paper or at the end of the statement. As you continue to look at statements in upcoming months, continue checking these symbols as they generally relay important information that can change statement to statement.
Fine Print: Fine print can include a number of things including updated regulations, new rules, or important information regarding upcoming changes. Take time to read and highlight anything that you find confusing!
Not all bank statements share information in exactly the same way and some are much easier to interpret than others. That’s why it’s important to familiarize yourself with the differences between statements at varying financial institutions that you may be a part of. Once you feel comfortable with the core information, you can use the various statements to your benefit.
Don’t let a piece of paper hold power over your emotions. When you open your statements and decode the information you give yourself just another opportunity to take back control over your finances!
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