It's time to talk about credit cards!
Are you the kind of person who dreads checking your credit card statement every month? Do you have an out of sight, out of mind approach to your bills? If that sounds like you keep reading! I've got the tips to help you empower yourself to stand up to your numbers!
Why is it important to understand your credit card statement? When you know what you're looking at, it won't seem so scary. Plus, you empower yourself to take a calculated and informed stance on getting out of debt.
Once you open the statement, take a pen or highlighter to mark the words and phrases that are most confusing. The list below contains some key information when it comes to decoding your statement. If you still have questions don't be afraid to call your credit card company or go into your credit union to find out more.
Key information to understand your statement
Some statements are sent quarterly, some monthly. Locate the date(s) on the statement to confirm the timeline you're evaluating. For the sake of practicing, you can either use your most recent statement or use an older statement for a practice round.
You may already be familiar with your interest rates but it's never a bad idea to check in. They give you insight into what's happening with your debt and how much interest will accrue on your principal. Note: these interest rates are sometimes shockingly difficult to find on a credit card statement. Make sure you're looking for your current interest rates and not at potential offers inserted by the credit card company.
Bonus: You can use interest rates as a motivator to help you speed up your debt repayment. For credit cards, some interest rates can be as high as 18% which could translate to a lot of interest added to your debt over time.
This reflects the amount of interest accrued during the billing period. It's calculated according to your interest rates and your principal balance. If you are under an agreement with a 0% APR for an agreed upon timeline, then you will see no interest charges.
This number indicates the amount you have paid off to date. It's kind of like your victory number. When this number matches your original loan—you've paid off your debt.
This number tells you the amount of credit available to you. Though it may be a high number you do not need to spend up to this limit on your credit card—in fact, you shouldn't. It's just the amount available to you.
New Balance (sometimes Principal Balance)
This is the balance that remains to be paid. Don't be confused by "new" which only indicates that the number has been updated (lower if you've made a payment within the last month, higher if you've charged your card in the last month) within the last payment cycle. Ideally, you want this number to be going down each month.
The balance on your loan at the end of the previous billing cycle.
Next Due Date
The date by which you must pay your next bill. If not paid by this date, you will incur a late fee. This is the date to put in your calendar. It's also helpful to set an email reminder a few days prior as a way to alert yourself to an upcoming due date.
This usually corresponds with how much interest has accrued on your account. If you want to pay off debt more quickly you will ideally make payments higher than this number if you can.
Generally found in the top section or at the bottom of a statement, this information includes ways to contact and communicate with your bank or loan servicer. The website, 800 number, and mailing address is usually included. This information is helpful in that it directs you towards the first point of contact for questions or concerns.
Asterisks or symbols
Circle any asterisks or symbols. These symbols are important because they usually indicate a rule, regulation, or exception. You can usually find their corresponding meaning located in a key along the bottom of the paper or at the end of the statement. As you continue to look at statements in upcoming months, continue checking these symbols as they generally relay important information that can change statement to statement.
Most bank statements will show fees that have been charged to your account. Whether it's a late fee or a monthly maintenance fee it's important to know what extra charges you're paying. To reduce these kinds of expenses, try negotiating these charges down or removing them entirely.
Fine print can include a number of things including updated regulations, new rules, or important information regarding upcoming changes. Take time to read and highlight anything that you find confusing.
Remember: Not all bank statements share information in exactly the same way and some are much easier to interpret than others. That's why it's important to familiarize yourself with the differences between statements at varying financial institutions that you may be a part of.
Don't let a piece of paper hold power over your emotions. When you open your statements and decode the information you give yourself just another opportunity to take back control over your finances.
[All credit to this list goes to this Life Hacker article]