credit cards

Guide to reading your monthly statement

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 all credit cards have 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.

A smart credit trick to remember is to save all charge receipts for the month and match them with the bill when it comes in. 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.

Previous balance: This one is self-explanatory. It's the outstanding blance owed last month. Check it for accuracy.

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

"Look to make sure they applied the last payment as they should have," says Rus Halsey, director of operations for GreenPath Debt Solutions, a nonprofit credit counseling service based in Farmington Hills, Mich.

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 at a cash-advance rate. 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. Many card issuers will apply payments to lower-rate balances first to maximize interest charges.

If you have to take a cash advance, find out the charges involved. Besides a high interest rate, you'll likely pay a fee for the privilege of obtaining cash through your credit card.

APR: It stands for annual percentage rate, and should be an important number to anyone who doesn't pay the balance off each month. The lower the rate, the less the cardholder will pay in interest.

Credit card companies can change the APR, even if the rate is "fixed," which is one reason to check it when the bill comes in each month. Also look for change-in-terms notices. Banks only have to provide a 15-day heads-up before they apply a rate increase, and that's only if the borrower didn't trigger the penalty rate.

Finance charges: This is the amount of interest and fees charged for the month. Some cards will impose a minimum finance charge, but this only applies if you carry a balance. If you don't pay off the card every monthl, you will pay the greater of the finance charge or the minimum finance charge.


Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

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