Decode Your Credit Card Statement

Getting a credit card statement is a monthly ritual, if you have one. But most cardholders choose to ignore these statements, assuming that a text message from the concerned bank about the amount to be paid is sufficient information. However, not being aware of the crucial information that you get through your credit card statements can be perilous at times and may land you in deep financial trouble in case your account has been tampered with. If you don’t go through it thoroughly, you could be ignoring some wrong charges inadvertently levied by your bank. Or if there is a sudden change in address, it can be the first step into identity theft. Whatever be the case, it makes sense to read through the credit card statement. Here is how you should read one.

Check the credit card number and other demographic information, such as your address, e-mail ID and the phone number mentioned on your credit card statement. If there are mistakes, notify the bank to rectify it.

Next you come across credit-related information. Do remember that credit limit and available credit limit are two different things. While the former tells you about the maximum amount the bank is allowing you to borrow, the latter indicates how much more you can spend right now, which means the difference between the credit limit and the amount of money you have already spent. Your income profile decides the credit limit offered to you. As you establish a good repayment record and your income rises, bankers are comfortable offering you higher credit limit. If you spend less on your credit card, you have the cushion of high credit limit that will come in handy in times of emergency.

Banks also mention separately about the cash advance limit. This is a sub-limit within the credit limit. This is the money you can withdraw from a teller machine, using your credit card. However, cash withdrawals on credit cards come with a steep one-time charge, which can be in the range of 2.5-3%. The interest on this also accrues immediately. So one should only use cash withdrawal facility in extreme situations.

Then you come to two important dates. First is the statement date – the date on which the credit card statement is generated. And the second is the due date. This is the date when you pay your bank. Please note that you need to pay in such a manner that your bank will receive the payment by due date. If you are paying by cheque, it is better to pay at least three days before the due date, so that the money is realised by the bank before the due date.

The minimum amount due and the total amount due could be another area where you may feel confused. Total amount due is the money you have spent on your credit card till date. Minimum amount due is a percentage of the total amount due, say 5%, that the bank expects you to pay before the due date. If you choose to pay the minimum amount due, you are opting for credit offered at a very high rate of interest – 36-42% per year. The bank charges you this rate of interest on the unpaid amount. And your available credit limit for the next month goes down accordingly. Moreover, you have to pay interest on all subsequent purchases from the date of purchase. In simple words, you start paying more than what you actually spent. If you fail to pay even the minimum amount due before the due date, the bank treats it as a default and levies late payment charges as well. So, always pay the total amount due before the due date. It also keeps your CIBIL score in good shape.

For your benefit, you should run through the list of transactions that follows these vital statistics. If you come across any discrepancy, it is better to inform the bank. If you are using a cashback credit card, do check whether all eligible transactions for cashback have been recorded in the statement for cashback. Also check the reward points you have earned. Some banks also send important notifications, such as changes in charges, interest rates and new rules, at the bottom of the credit card statement.

Following these instructions will be adequate to keep yourself safe from any misrepresentation of facts or tampering with your account.

Rajiv Raj is the Director and Co-Founder of www.creditvidya.com
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