Credit Cards
Understanding Your Credit Card Statement
Understanding your monthly credit card statement can help determine whether your
spending is in line with your budget. By reading and understanding the fine print
(especially the fine print) of your statement, you will be practicing proper credit
card management. This management could also prevent overspending and it will help
you to become more educated on how your credit card program works. Ultimately, you
will begin the process of preparing yourself to keep out of credit card debt.
Look carefully at your credit card statement and you will discover
a lot of information. But you may wonder, what are the most important areas that
you should be familiarizing yourself with? Consolidated Credit Counseling Services
has prepared this guide to assist you in recognizing the most crucial elements of
your credit card statement and to ensure that you learn the skills of credit card
management.
The Front of Your Credit Card Statement
Annual Percentage Rate (APR)
The APR is a measure of how much your debt is costing
you. It is expressed as an annual
rate or by the amount of interest you would pay
annually. Remember, the APR is a major key to calculating your monthly finance charges
-- the higher the APR, the more money that will come out of your pocket to use this
card. On most credit card statements, the APR is presented as both the APR and either
a Daily Periodic Rate or a Monthly Periodic Rate. The better your credit card management
is, the lower the APR will be.
Minimum Payment Due
The minimum payment is the amount of money you must pay on your credit card each
billing cycle to remain in good standing with your creditor. The minimum payment
is usually determined by your monthly balance and it varies according to the formula
each creditor uses. Minimum payments usually cover the finance charges and fees
for the month plus a small amount of principle.
You must make at least the minimum payment by the due date. If you fail to make
the minimum payment you will be putting your financial health in jeopardy. Creditors
can charge outrageous late fees and raise your APR even if you are one day late.
Also, payments made 30 days or later are recorded on your credit report, which
is something that can affect your ability to get new credit. Strong credit reports are dependent on good credit card management.
Be aware though, if all you are paying is interest, making the minimum payment on
your credit card bills just extends the life of your debt. You could compare your
credit card debt to walking on a treadmill. You walk and walk
but get no where closer
to paying off your debt.
New Balance
The new balance on your credit card is the unpaid amount or what you still owe. It is usually determined by:
• Starting with the previous month's balance
• Subtracting any payments or credits
• Adding new charges, miscellaneous fees and finance charges for the current billing
cycle
Be sure to look over your statement to make certain that the numbers are correct.
This is a crucial part of credit card management. Here is a general example:
|
Balance Summary |
Amount |
|
Previous Balance |
$747.94 |
|
Payments |
-500.00 |
|
Credits (for returned purchases) |
-21.84 |
|
Purchase & Other Charges |
+ 795.47 |
|
Cash Advances |
+ 0.00 |
|
Late Fee |
+ 0.00 |
|
Over-limit Fee |
+ 0.00 |
|
Finance Charge |
+ 17.45 |
|
New Balance |
$1,039.02 |
