How to read them
Opening a credit card is a great way to start building your credit so that you are better able to secure auto, personal, and home loans in the future. However, it is important that you use your credit card wisely in order to avoid accumulating too much credit card debt. That responsible use starts with being able to understand your credit card statement.
The first time you receive a credit card statement, you may be a little overwhelmed by all of the information it contains. With the advice that follows, though, you should be better able to read and interpret the statement and then use the information it provides to make smart decisions.
Here are the key items on a credit card statement and what they mean.
Open and Close Dates
Credit cards offer what's known as revolving credit. This means that you can spend more and more of your open credit each month, and at the end of each month, you're sent a statement. The open and close dates are simply the starting and ending dates for the credit period depicted in that statement. For example, your November credit card statement may have the open and close dates of October 4 - November 3.
Under the purchases line, you'll see the total amount you spent on your card during that statement's period. For example, if you made one $20 purchase and another $40 purchase, you should see an amount of $60 on the purchase line.
The new balance is the total amount owed on your card, including this month's purchases along with any remaining balance you did not pay off from previous months. So, if you already owed $20 and charged an additional $40 this past month, your new balance would be $60.
Minimum Payment Due
This is the minimum amount you have to pay on your credit card this month in order to avoid late fees. Note, this is only a small fraction of your balance. You do not have to pay the balance in full each month, although doing so is a very good idea for reasons you'll come to understand after reading about interest.
Any amount under "interest charged" is the interest that has been added to your account for any balance you did not pay of the previous month. If you pay the full balance each month, you will not be charged any interest. If you only make the minimum payment, or if you pay an amount between the minimum payment and your balance, you will be charged interest.
This is simply the date by which you must make at least the minimum payment. If you pay after this date, you'll have to pay a late fee.
Your credit card statement should include a full list of transactions you made that month. Each transaction should list the date, amount, and retailer. If you see any transactions you do not think you made, they may be fraudulent. Contact your credit card company to report them.
If you pay your bill by mail with a check, you'll include this portion of the statement with it. If you pay online, you can shred this coupon.
Interest Charge Calculations
Most credit card statements include a section where they show how any interest you owe was calculated. This helps you understand the final amount of your bill.
Hopefully, this guide has given you some insight into how to read a credit card statement. The better you understand how your credit card works, the more responsible you can be with your money.