Understanding Monthly Credit Card Statement – Part 2

Continued from Part 1:

We can’t imagine that many people take out the previous month’s statement and compare the two, but it’s worth doing for a number of reasons.  Credit card companies can change just about anything they want to change in your agreement with you, from the credit card APR to the calculation of the monthly minimum credit card payment, and all they have to do is give you advance notice in writing.  Sometimes these notices go unnoticed.  Here are a few things to compare on a month-to-month basis –

The APR.  The annual percentage rate can change if you have a variable rate credit card, and you should know if it changes.  It can also change on a fixed rate card if they give you fifteen days notice.  If your credit card interest rate goes up for any reason it can cost you a lot of money.  If the rate goes too high, it may be tie to find a new credit card.

The Minimum Payment.  One hopes that the minimum credit card payment is never an issue, but in reality it is for many of us from time to time.  Minimum payments have risen in recent years because federal law now mandates that the credit card minimum payment cover some small portion of the principal owed, not just the credit card interest.  Rising minimum payments can put some consumers into trouble, and recognizing trouble is the first step in dealing with it.

The Grace Period.  The grace period is the amount of time you haveto pay the full credit card balance or a partial payment before interest begins to accumulate on new charges.  This number doesn’t change often but if it does it can cost you money over time.  It’s also just a good idea to be aware of the concept.  The more aware you are, the more money you can save.

The Credit Limit.  If you’ve been a responsible credit card user you may get a bonus: a higher credit limit.  Don’t be so fast to expand into this new territory, however.  People looking at your credit like to see that you use only a third of the credit available at any one time.  It’s also sadly possible that you’ve been reined in by the issuer because your payment history has been spotty.  Compare your limit from month to month so that you are aware of your status.  Chances are you’ll be informed in other ways, but when you have the statement in your hand take a close look.  View the credit card online if you can, this is more convenient since you can do it on your time and as often as you like.

The Name, Address, and Account Number.  If you have moved or if you’ve lost a card, or if you old card expired, check once in a while to make sure that this information has been properly updated.  Check the name and the billing address along with the credit card number to avoid any potential problems including identity theft.

Here are some ugly things that appear on the statement, but you still have to look at them.

Cash Advances.  Credit card cash advances are sometimes necessary but they are also expensive.  The credit card APR for cash advances is really high, and in some cases you have to pay off your balance for purchases before any of your payment goes to pay off the cash advance.  They really have you there.  If you’ve taken a cash advance and look at the numbers on the statement you are unlikely to do that again.  If you really want a credit card cash advance or even a credit card balance transfer, look for a new credit card that has the best credit card rate for these services.

Finance Charges.  Under this heading you will see what you pay for the total balance that you carry from month to month.  It’s important to look at this number and think about what you could do with this money if you weren’t spending it in interest.  Over a lifetime people who carry high balances pay a LOT more in finance charges.

The Late Fee.  If your payment was late, that’s always bad.  It’s bad for your credit rating, and if that isn’t enough they’re going to charge you a significant fee.  Take a moment to think about this when you look at your statement. 

The Over-the-Limit Fee.  This one is also bad because in addition to the fee and the hit your credit rating will take, you also have no credit available because it means you have used more credit than you were allowed.  This calls for serious action of some kind because it means you are in control of your finances.  If you can lower your expenses or get some credit counseling, that’s wise.  The over-the-limit fee is a real call for action.

Finally, let’s turn our attention to a happier topic, the category of credit card Payments and Credits.  This is a list of the payments you’ve made, and you ought to take a minute to savor that.  You may also have received a credit for something you returned to a store, for example, or some other miscellaneous reason.  It’s easy to lose track of these credits during the course of a month, so be sure to look for them on the statement. 

The receipt of the monthly statement in the mail or email ought to be something other than an exercise in agony.  It’s a time for you to understand clearly the state of your finances and the cost of using your credit card services.  It’s a time for sober thoughts regarding your financial successes and failures, and what they mean for your future.  It’s also an opportunity to fix any problems and retrieve any money that seems to have wrongly slipped away.

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