Reading Your Credit Card Statement

The credit card statement arrives in the mail or posts to the email, no big thing. Everybody gets them and everybody does the same thing … they look to see how much and when. Some folks might scan the charges to the account and a few might skim across the interest charges but most just pay attention to the highlights … how much and when.

If You’re Confused … Don’t Be

A credit card statement may not be on the New York Times Bestseller list, but it is something everyone should read. The layout may look a little daunting at first glance, but it holds important information like Annual Percentage Rate (APR), Finance Charge, Previous Balance and a host of other minutia that is actually quite enlightening and can be helpful. Like many things in life, you just have to take the first step on the path and that means starting in the upper left corner and making your way down the page.

Must-see Destinations

A good sight-seeing trip always has a few marquee destinations on it and the credit card statement isn’t much different. Here are some of the highlights to take in:
* New Balance
* Minimum Payment
* Due Date
* Transactions
* Previous Balance
* Fees & Interest Charged

These are the usual destinations for most readers, but there are a few other spots of interest that are just off the beaten path.

Keep an Eye Out and You’ll Find Treasure

Perusing the credit card statement will eventually reveal some real treasures of information for the cardholder. Ever since Congress passed the Credit Cardholders Act in 2009, the faces of all credit card statements have been evolving. Credit card companies must show how long it will take to payoff the card balance if the minimum payment is all that is made. It’s called the Interest Repayment Disclosure. Talk about a shocker! Most people never realize why being in the credit card business is so good until they take a look at how much interest they’ll pay by only making a minimum monthly payment.

Look Closer … Closer …

Credit cardholders should keep a close eye on the fees statement. Inside the fee breakdown disclosure there is a line item that reveals how much has been paid in fees for the year. Most consumers aren’t aware of how much revenue those pesky fees generate for the credit card company and they can easily climb into the hundreds of dollars if not kept in check. Add the fees to the interest charges and then you’ll really understand the cost of credit.

Very Interest(ing) Reading

The credit card statement also reveals how much you’re paying for the plastic. It’s one thing to pay some interest on an account, but the annual amount of interest is the main item; especially when those 4.9% APR cards suddenly jump to 19.9% because the one-year anniversary has passed. Smart consumers know about transferring balances onto new cards when the old cards jump up in interest, but even a super- savvy card-hopper can miss a month or two. And that can be a very expensive lesson to learn.

How Does All This Data Affect a Credit Rating?

In the real world, credit bureaus accept, crunch, and spit out numbers on which life itself depends. This might seem a little overly dramatic but it makes a point about how a credit rating and the credit card statement come together. When a consumer pays higher interest, when they miss a payment deadline or don’t become excited about unusual fees and charges, they not only lose money, they broadcast to the credit world what kind of debtor they are. Credit card companies buy the data from the three credit bureaus (Experian, Equifax and TransUnion) and mine it like it was gold because to them, it is gold. They analyze buying habits, repayment cycles, payments made during grace periods, and a host of other matrices to discover their next potential customer. So if you want to know why you get all those annoying credit card offers in the mail, it’s because they know you and they want you.

Manage Wisely, Grasshopper

When the credit card statement arrives, it really does deserve more than a quick glance. The educative value is great, but the opportunity to save money, understand what it really costs for flashing plastic, and what potential disasters may await reporting to the credit bureaus that can damage a credit score is of much greater value. Prudence dictates a closer look with a critical eye, because a credit card statement is a roadmap telling where you’ve been, where you are … and where you’re headed.