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Your credit card statement made simple

Credit card statements are the ultimate math class word problem. Get one wrong and the bad mark will stay with you a while -- on your credit report.

To make it even more challenging, nearly every credit card has a slightly different set of requirements and a slightly different statement. So here's a cheat sheet -- in plain English -- to help you sort through that next bill and save a little money in the process:

Purchases/new charges: This is where the statement should spell out what you purchased and how much you borrowed. It's also the first thing you want to check, says Mark Oleson, assistant professor and director of the Office for Financial Success at the University of Missouri.

His smart credit trick: Save all charge receipts for the month and match them with the bill when it comes in.

"I want to make sure that when I pay my bill, I'm paying the amount I charged," Oleson says.

That way if you're double billed or charged for something you didn't buy, you can take action immediately. If you have a problem, quickly contact the credit card company by phone and follow up with a letter.

In addition, you want to look at what rates are applied to what charges. If you took out a cash advance, chances are you might pay that at a higher rate, which probably started the day you received the money. If you have a balance transfer at a special rate, you want to make sure that's noted correctly on your statement.

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Previous balance: Does the number track with your last bill? And is it going down or are you just treading water?

Payments and credits: Did you get credit for that return on Dec. 26? Or for the last check you sent?

"It costs you money if the information isn't correct," says Bettye Banks, senior vice president for Consumer Credit Counseling of Greater Dallas. Banks, who manages the CCCS Dallas Education Department, suggests looking to see if they got that last payment or if you're going to be paying late fees. Missed payments could cause you to exceed your credit limits and bring on heftier interest rates. They also make nasty, nasty marks on your credit bureau report, she says.

Didn't get a statement? "The payment is still due," Banks says. Call the credit card company's number and say you didn't get one and send a payment in anyway.

And if you sent in a check to pay off last month's cash advance, did the company apply the credit correctly?

Cash advances: This will tell you how much you've borrowed. Many cards charge a higher interest rate on a cash advance than on purchases. They may not offer a grace period. And some don't automatically apply your repayment to the cash advance debt.

If you have to take a cash advance, find out the rules for borrowing and repaying ahead of time. And track this balance until it's paid off in full.

APR: This stands for the annual percentage rate, which a credit card issuer usually computes by using the average daily balance.

It's worth checking, because as Banks says, credit card companies "can, and do change the APR." Usually they will let you know if they plan to change it by sending you something in the mail, but they don't have to, she says.

Beware of missed payments! Since your payment history affects your APR, it could skyrocket if you start slacking on your payments. For instance, they can increase your APR from a low introductory rate of 6.9 percent to as high as 22 percent, 23 percent or even 24 percent, if you miss a few payments in a row. Check that fine print to see what they could raise the rate to if you miss payments.

Finance charges: If you carry a balance, and sometimes even if you don't, finance charges are the penalty for using plastic. Some cards won't levy finance charges as long as you pay off your bills in full each month. Others start charging interest from the moment you use the card.

"This is simply the cost of using credit," Banks says. Finance charges vary by state and are tied to your interest rate.

You may have several different finance rates on one card -- one for balance transfers, one for cash advances, etc.

"Obviously, [you] want to make sure [the right totals] are in the right baskets," says Oleson.

Grace period: How long can something stay on your bill before you are charged interest? While some cards have grace periods, others don't. Find out if you have a grace period, whether it applies to purchases or cash advances and what the length of time is.

Minimum payment: This is the least dollar amount a creditor will accept for each bill -- commonly around 2 percent of the balance. "The prudent consumer will certainly pay something more than the minimum," Banks says.

Due/pay by date: Not the postmarked-by date, not the arrival date of your check, "that's the date your payment should be in their hot sticky hands," Banks says. Allow your snail mail payment five to seven business days to get there.

Another option: Paying bills online. While you should still allow a few days for your payment to process, this is fine for people who are comfortable with the site they are sending credit card information to, says Banks.

The advantage of the online payment is obvious: "You can make the payment immediately and avoid the whole mailing system," says Oleson.

Credit limit: What's the maximum the card allows you to borrow?

"Something I'm concerned about is my credit limit," says Oleson. "If I'm in a situation where I'll be pushing that and the finance rates could bump me over, I'm going to call and request an increase."

But the best long-term strategy for consumers and their credit ratings is to have lower limits, he says. "Because [you] have less potential debt."

Whatever your credit limit might be, you should not owe more than 50 percent of the credit limit, says Banks. This negatively affects your credit score and the amount of credit you can obtain for future purchases.

Late fee: Remember when you were late to class and got slapped with detention? With a credit card, the late penalty averages from $30 to 35 per month, Banks says.

Over-limit fee: If you charge beyond your limit, or if late fees take you over the limit, you get hit with this charge each month until you bring your balance down to your allowed amount. It generally ranges from $30 to 35, says Banks.

Name, address, account number: Self explanatory, yes. But check them over to make sure all the information is right. Addresses and ZIP codes change, and it's easy to transpose account numbers.

Miscellaneous fees: The credit card company can also charge for things like automatic debits and account dormancy. Look for those charges and call the company if you see something you don't recognize.

Bottom line: "Read your statement, as well as the back of it," Banks says. "The devil's in the details."

Leslie Hunt contributed to this story.

-- Updated: Oct. 18, 2005

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