Understanding Your Credit Card Statement

The credit card application is straightforward and fairly easy for most people to complete. Using the card is easy too - just swipe and sign. Next comes the consumer credit card statement and that stops some people in their tracks.

At first glance, they think it's confusing - but it's not if you understand the terms used on that statement. None of this is a surprise. All of the terms and conditions - as well as the annual percentage rate (APR) - were disclosed to you in the application.

Did you read it? If you didn't read it, now you know why it was important. Let’s go over the major terms you’ll find on your credit card statement so that you can quickly decipher your monthly bill.

APR – the Annual Percentage Rate is what you pay on the balance you owe to the credit card company. Some cards have a fixed APR and others have a variable APR. The variable APR means that the bank or financial institution can change the rate at any time without warning.
This is a way to penalize deadbeats. Fail to make a payment or not make the minimum payment and watch your APR go from 12% to upwards of 22% without warning - and there’s nothing you can do about it because you signed on the dotted line.

Due date – This is the date that the payment must be received. Don’t bother to blame the post office. If your payment arrives even one day late, there’s no grace period. Late is late, and late is costly.

Find out the date of the credit card billing cycle. Choose a cycle that hits just after your paycheck so you know you’ll have money for the payment. You can find a credit card company that lets you choose the billing cycle date when you fill out the initial application. Some companies let you change the billing date while others don't.

Minimum Payment – This is the least you can pay to stay current with your credit card debt. If the amount is $21, then send exactly that amount or round up to $25. Don’t send $20 or you won’t get credited with making the minimum payment. Even a minor dollar difference counts here.

Credit limit – Printed on each monthly statement, the credit limit is the maximum amount that you’re allowed to charge. This amount is based on your credit history and may be increased periodically if you’re a prompt payer.

Going over your credit limit may result in your charge being denied or a big penalty fee for the over-charge amount being tacked onto your bill. Either way, its going to cost you too much for that mistake.

Reward or Bonus Points – These points accrue based on a formula that’s related to your spending. For example, you might get one reward point for every ten dollars you spend. The points will be tracked on your monthly statement as a running total. Any points used will be subtracted from the total.

If there are any other terms that you don’t understand, call your credit card company or get out the initial agreement you signed and see if you can find out what it means. You don’t want to be paying for something that isn’t necessary.