Let’s play a quick game. What is something that comes in the mail every month, has your monthly credit information and is underused by many? If you guessed a credit card statement – congratulations, you won. Being a responsible credit card user means that you are in total control of your debt. You know how much you can afford to spend in a given period. Understanding and reviewing your monthly credit card statement is one of the keys to maintaining this control.
If you have previously overlooked your credit card statements, this article will break down the major components to help you win in your financial life.
A credit card statement is a periodic statement that outlines your spending history within a statement period. Each month, you will receive this document in the mail or online format from your credit card provider detailing the ins and outs of your credit account. It is essential to check your credit statement for a couple of reasons consistently:
Track your debt. It is VERY easy to lose control of your credit card spending. One second you have no debt, and before you know it, the daily coffee purchases and impulse spending adds up, putting you in a big hole. Unfortunately, it often happens to countless people. Tracking your debt with a credit card statement is practical and saves you financial hurt when combined with other good financial practices like budgeting.
Avoid fraud. Fraud is rampant, especially in a digitized world. Click a weird link, and someone may have access to your sensitive information. One way to combat this is by consistently checking your credit card statements to see if any wrongdoing has happened.
While each credit card provider will have a different layout on their credit card statements, the major features you should include are the following:
This includes basic information about your mailing address, account number, type of credit card and the start and end dates of your billing cycle.
The new balance section can be stressful or just another bill depending on your credit card use. This section of the credit card statement shows your new amount owed.
The transaction section lists all of the purchases you have made during your statement period. This includes the dollar amount and the date of the transaction. This section is crucial to understand, as you can also check for any errors or overcharges on your account. It may also feature fees like the credit card’s annual fee, late payment charges etc.
This section shows you how much you need to pay off within your billing period, which in this case, is at least the minimum payment. The minimum payment is the minimum your credit card issuer will accept without getting you in trouble for not paying your credit card provider.
Friendly Tip: The key to making great strides in your credit history is to pay off your credit card in full and on time every month. If you make a late payment, this could negatively affect your credit score, and you may be charged a late payment fee. Additionally, making the minimum monthly payment is not a viable long-term payment plan. You may well spend thousands in interest before you pay the balance off. Only buy what you can afford!
The credit limit is the amount that you have been approved for. If you have carried a balance, your statement should also tell you how much you have left in the form of available credit. This is the amount of cash available before you reach your limit.
Friendly Tip: Going over this can hurt you in several ways. Based on credit criteria, you want to ensure that you only spend about 15-30% of your credit limit. For example, if you have a limit of $1,000, try not to spend more than $300.
The interest rate represents the amount you are charged on an unpaid balance and cash advance. Most credit cards charge around 20% on any carryover balance (ouch!), and for cash advances, it can go up to 22.99%. This is another risk of overleveraging yourself with a credit card- you should know how much interest is being charged.
Friendly Tip: Don’t be afraid to shop around for the lowest rates when it comes to credit card interest. If you need a place to start, please read our article on the best low-interest credit cards of 2022.
When used wisely, credit cards can help you get serious rewards. If you enjoy collecting rewards points from your credit card, this section will give you information on the number of points or cash back you have accrued. Not all credit cards offer rewards or cash back, so this section may not be featured on your statement if you do not have those features.
Friendly Tip: Stay up to date with the rewards structure of your credit card. Go online or contact the credit card issuer to see what you can spend your rewards on.
When reviewing your credit card statement, you want to keep your eyes open on your balance, available credit, important changes to your account, fees and any errors. If you do notice that your statement has errors, it is crucial that you report them to your credit card provider and quickly resolve the issue. Not only will this impact your credit history if left unresolved, but the increased costs from an erroneous charge could also bring untold financial burdens to your life.
Friendly tip: If you suspect fraud is at hand, you can do an even deeper dive and check your credit report. According to the Government of Canada, you should:
Call your credit card provider directly for any other matters, like finding a purchase you did not make.
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