How To Understand Your Credit Card Statement

  • 6 min read

Just receiving your credit card statement every month isn’t enough to protect you from unauthorized or unexpected charges. You’ve got to be able to understand the information that is being presented to you! Pull out a recent statement, review it for charges that don’t line up with the purchases you’ve made, and then together let’s learn what this information in front of you has to say.

What Are All These Crazy Terms?

The credit card industry has some specific terms, lingo if you will, that they use on your credit card statement. By knowing the following terms, you’ll have an idea of the information that is really on the statement in front of you.

APR: This is the Annualized Percentage Rate. Many credit cards have different rates for different kinds of purchases and the interest rate is applied each month to the outstanding balance. If your APR keeps going up, ask your lender why.

Available Credit Line: This is the amount of credit you have not used, but still have access to using if need be. Don’t use this figure as a justification to spend more – the best practice is to keep your revolving balance to about 25% of your total available credit.

Available credit is determined by subtracting what credit was used during a period from the amount of credit granted.  Hence, if the consumer charged $400 during that month and has a total of $1500 in a credit line, the available credit is $1100.

Cash Advance Limit: Some credit cards restrict how much cash you can take in a given period of time. This will tell you how much. Keep in mind that most credit cards have a higher APR for cash advances.

Finance Charge: This is tied into your APR and includes fees and other charges you may pay on a debt. To avoid these charges, keep your balance paid off every month as much as possible.

Minimum Amount Due: This is the amount you must pay for your lender to keep your account listed as current. Lower balances generally equate to lower monthly amounts due.

New Balance: This is the total amount of debt that you owe, including new purchases made during the statement period. Try to make the largest payment possible to limit interest charges being applied to this debt each month.

Past Due Balance: If you miss a payment, the minimum amount due will become two months worth of payments instead of one. Missed payments can also be a cause of a penalty APR and negative credit report information. If you can’t make a payment, call your lender immediately to limit damage to your credit.

Periodic Rate: This is how the APR is divided up and applied to your outstanding balance. Use it to determine what your interest rate will be each month – it’s a great motivator to pay off debt!

Post Date: This is the day when a retailer confirms a purchase. A best practice is to compare your purchasing history with the information on the new purchases to make sure they match up.

Total Credit Limit: This is the total amount of credit that the card lender has approved you to have. This amount can increase or decrease based on your spending and payment habits.

By knowing what information is on your credit card statement, you’ll be better equipped to manage your finances effectively.

What is the Law for Statement Requirements?

Canada has work towards creating laws that help the credit card user be fully informed in regards to using credit to purchase goods and services. The information presented on your monthly statement helps ensure that an average consumer is well informed and set up for success.

A monthly statement by law must include a number of items.:
1. The outstanding balance for which a grace period is given to pay off in full to avoid interest costs.

2. The estimated time it would take the card holder to repay the outstanding balance if the consumer only paid the minimum amount required.

3.:The amount credited or charged during the month to the card holder’s account for purchases, cash advances, non-interest fees, balances transfers, payments made and interest charges.

4. The date of all purchase must be disclosed in the monthly statement.

By law credit card issuers do not have to send monthly statements if the card has no outstanding balance at the end of the period or the consumer has defaulted on payments and the card has been suspended or terminated.

How to Read Your Credit Card Statement

Statement Billing Period

This the period during which the credit used will accrue interest.  This typically is for the period of a month.  It is important to note the exact day the period begins and ends because this is when payment will be due.

Balance Summary

This is perhaps the most important part of a statement.  This includes the amount of credit extended for the card, the amount of money used during that period, the amount of payments given during that payment, the fees charged, and the interest charged.

Payment Information

Under this section, the consumer will see a few things: what his balance is, what his minimum payment is, and the payment due date.

Minimum Payment

The minimum payment is the smallest amount of money a consumer can pay on the credit card in order to avoid penalty. The penalty might be a fine. Note that, even if the user makes this payment, he will still be assessed interest on the balance provided he does not pay in full by the due date.  The minimum payment is often a small amount of money.  The consumer is wise to pay more than the minimum payment each month in order to pay the balance off faster.

Transactions

The consumer will see what he charged that month.  It is important to review each charge very carefully.  If the user notices any discrepancies, it is important to notify the credit card company immediately as it may be a case of identify theft.

The consumer should monitor his credit card transactions every few days, not just when he receives his statement, to avoid any problems.

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Christopher - BSc, MBA

With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.