Credit Cards

How to Read a Credit Card Statement

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Everyone who has a credit card has one thing in common, we all receive a statement every month. Whether it is delivered electronically or by postal mail, every credit card statement follows roughly the same format. Nevertheless, there is a lot of  information presented on these statements, and it can be confusing to many credit card users.

Let’s take a look at what makes up these statements, and figure out what you need to pay the most attention to.

Payment Information

The first thing that you will likely see at the top of page one of any credit card statement is the payment information. This will include three lines:

  • New Balance: This is the account balance as of the closing date, which is the end of the statement period. This will include any interest charges, fees and approved transactions, but not pending ones.
  • Minimum Payment Due: This is the minimum payment required, and each card issuer may calculate the cardholder’s minimum payment in slightly different ways, though the payment must be high enough to reduce the balance.
  • Payment Due DateThis is the latest date by which that payment can be received without the card user incurring late fees.

Account Summary

Here you will find a lot more information about how your balance breaks down, including your previous balance, payments, credits, cash advances, balance transfers, fees and interest charges. You will also see information about your credit limit and available credit for both purchases and cash advances.

Late Payment Warning

This section will explain what will happen to your account if you do not make at least the minimum payment by the due date. The stated consequences typically include a late fee and an increase in the interest rate to a higher penalty interest rate.

Minimum Payment Warning

This interesting section actually details how long it will take and how much you will pay if you make only the minimum payment. In addition, there is also an estimate of how much you would have to pay each month in order to pay off the entire current balance in three years, and how much interest you can save by doing so instead of making only the minimum payment. This is also where card issuers may offer a phone number to contact a credit counseling agency.

Account Activity

Here is a list of payments and credits during the statement period that can include fees and interest charges.

Interest Charges

This section lists the interest rates, balance, and interest charges that were applied. Within this section, there are lines for purchases, cash advances and balance transfers, since each separate balance might have its own interest rates and terms.

Contact Information

Here is where you can find the phone number for customer service, payments by phone and the Internet address for the card issuer.

Reward Information

If the card offers rewards, the card issuer will likely present a summary of the rewards earned during the statement period.

Other Disclosures

The back of each page of the statement often consists of fine print detailing policies related to privacy, disputing charges, reports to credit bureaus, and many other details.

Where Should You Focus?

With all of this information present on every credit card statement, what do cardholders need to pay close attention to?

  • Payment information. The easiest and least costly way to manage a credit card account is to simply pay the “New Balance” by “Payment Due Date.” By consistently paying your balance in full and on time, you will avoid interest charges.
  • Account Summary. Here, you should be looking closely at how much you purchased and what payments were received.  You should also be concerned as to what interest charges and fees were incurred, so you can try to avoid these costs in the future.
  • Minimum Payment Warning. If you can’t pay your entire statement balance in full, and are considering making just the minimum payment, pay careful attention to this section. This section was mandated by law in accordance with the CARD Act of 2009. By showing cardholders how long it will take, and how much interest they will pay by only making the minimum payment, the creators of the CARD Act hoped that cardholders would pay more than the minimum and avoid some interest charges.
  • Account Activity. Every cardholder should look over each line of this section, looking for fraudulent or erroneous charges. As tedious as this is, it is the only way to ensure that you only pay for what you received.

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