Last updated: 11/22/2017
One law that changed credit card statements was the Credit CARD (Credit Card Accountability, Responsibility and Disclosure) Act of 2009, which required a clear disclosure on the statement about minimum payments. This mandated disclosure must inform the borrower how long it will take to pay off a credit card balance if s/he only makes the minimum monthly payment. There are also some other required disclosures:
- 36 month payoff—the creditor must show how much the borrower would have to pay each month in order to completely pay off the balance in 36 months.
- Due dates—the due date and any penalty or late fees must be clearly disclosed.
- Penalty rate—if the account’s APR (Annual Percentage Rate) will go up due to a late payment that must be noted on the statement, along with the new penalty rate.
- Annual interest paid—the statement must show how much the borrower has paid in the current year, and must specify how much went to principal and how much went to fees and interest.
While these changes over the years have made statements easier to read and understand, a credit card statement is still a complicated document with lots of terms to disclose. And many credit card terms are variable, depending on the current prime rate, or on the size of the balance outstanding. Because there’s no way to make a credit card statement super simple to read, we’d like to offer a helpful overview of the information included in a credit card statement and how to interpret it.
- Current balance: this is the total amount you owe toward your credit card balance as of the statement date. It might not include recent payment or charges you have made since the statement was printed. Get in the habit of checking your current balance online to see the most accurate number.
- The minimum payment due should always be exceeded unless you are struggling or on a very tight budget. Always pay as much as you can afford in excess of the required minimum toward your credit cards each month. The minimum is calculated based on a percentage of the total balance. In this example, the minimum is 3.4% of the total balance. It’s not uncommon for the minimum payment to be 2 to 2.5% of the total balance owed. It’s usually never more than 4%.
- Payment Due Date is when the creditor must receive your payment, not when you should send it. This due date should be at least 20 days from when the statement was printed; in our example, Owlbert has been given 27 days to pay from the statement date. You’ll see a Late Payment Warning nearby.
- The late payment warning describes the consequences of failing to deliver the payment by the due date.
- By law, creditors must now include a Minimum Payment Warning to show you how much extra you will pay if you only make the minimum payment and how many years it will take to pay off the debt.
- Information about contacting a credit counseling service is now required on credit card statements by law.
- A previous balance is an amount left over from the previous billing period that wasn’t paid off. The more one carries balances from month to month, the more expensive credit cards become. Your goal should be to pay off your balances in full every month to avoid interest charges.
- Double-check your payments and credits to be sure that everything has been credited properly. If you returned an item to the store and they were going to credit it back to your credit card, the amount should be listed here, and details of the transaction should be listed on a following page.
- Fees can greatly exceed the interest charges on typical credit cards. Average fees can range from $21 to $49 per incident. On this statement, the interest charged was only $12.22 for the month, so a single fee would likely double the total cost of this account. Also be on the lookout for unfamiliar fees for things like credit insurance that you may not have asked for and should be able to cancel.
- If you have past due amounts showing, something is very wrong. Set up automatic payments if possible to avoid any accidental late fees.
- Your available credit applies to potential purchases, not necessarily cash advances or balance transfers. Your creditor can change this credit limit amount; make sure you always know what the current amount is. A high credit limit can improve your credit score, but be careful not to take an increased credit line as an invitation to borrow more. The closer to your credit limit you are, the lower your credit score will get.
- Use the payment coupon if you’re mailing a check to your credit card company, as this will ensure that your payment is processed correctly and quickly. There may be instructions for making a credit card payment by phone or online. Paying online is an excellent idea, as it’s quick and you can get confirmation that the payment was applied. Paying by phone can sometimes incur extra fees, so check first if that pertains to your account. However, if your payment is close to being late, a pay-by-phone fee is often less than a late payment fee (or the risk of a late payment posted on your credit report).
- Double check that your address is current and correct. When you are setting up billing in online accounts, your address will have to match what the bank or creditor displays here to the letter. For example, if your address here abbreviates the street address to “Latham St.” you would want to abbreviate it the same way in online accounts, including punctuation. Any mismatch may cause the bank to reject the credit transaction.
On the back of the first page will be fine print explaining various terms and conditions in more detail. Here you’ll find the mention of your grace period. During this time, if you pay off the debt in full, you won’t incur any interest charges. It’s always a great idea to pay off your balance in full during this grace period. If you do so, you’re essentially getting access to credit for free, and still enjoying the benefits of using a credit card, like security and convenience. You’ll also boost your credit score over time with good repayment practices.
- Make sure all of your transactions here are accurate. If you had a return, you should see the name of the retailer and the amount credited here.
- If you see any unfamiliar or fraudulent charges, call the retailer first. Sometimes the charge may be legitimate, but unfamiliar to you. You might call the retailer at the listed number to inquire about the purchase—it may turn out to be something you legitimately ordered. If you have an annual or monthly subscription, that may be legit but you forgot setting up the subscription in the first place. If you report the charge as fraudulent, your card will be canceled and your creditor will have to issue you a new one with a new number. Avoid this hassle by reaching out to the retailer and canceling the subscription if necessary and asking for a refund. If the charge turns out to be fraudulent or the retailer won’t confirm it for you, then call your creditor to report the unauthorized transaction.
- By law the creditors must give you year-to-date totals of your interest charges and fees. A very high number here could be a sign of a problem; a credit counselor can review the statement with you to help you understand how the charge got so high and what your options are. (See number 6, above.)
- Each type of transaction is calculated separately. Here you can see the interest for cash advances is nearly double the rate for purchases. Getting cash advances on a credit card is never a good idea!
Other things that might appear on a particular statement include:
- Changes to the account. You’ll have an additional page or a prominent call-out box on the first page letting you know some terms on the account have changed.
- Rewards information. If your credit card offers some kind of rewards, like points or travel rewards, there will be a section detailing your current status and any rewards earned during the current billing period.
- News and updates. Your creditor may include information about special offers, or “ads” for other products or services.
- Lost or stolen cards: your statement might have a specific phone number listed to report loss or theft. Otherwise, just call the main customer service number on your statement to report a missing card.
It may seem like there is a lot of information to review on your credit card statement, but it should only need a quick review every month. If you’re finding that it takes too long to go through your credit card statements, then you’re probably using credit too much. Call for debt counseling if your credit card statements have gotten out of hand.