Knowing how to read a credit card statement could really save you a lot of money! In the last article, Sally Spender spent $400 on a shopping trip, paid $20 in interest, but she still has a credit card balance of $394 after two months. Sally Spender is on the fast-track to a very expensive credit card debt!
Credit Card Statements 101
Sally Spender gets a credit card statement mailed to her home each month. Each credit card statement shows:
- Her current credit card balance
- Her minimum payment
- Sally’s spending in the most recent month
- How much money Sally is paying in interest
Credit card statements were recently simplified due to a new law by Congress that requires credit card companies to make certain disclosures to customers. Thanks to this law, reading a credit card statement is easier today than it was in the past.
Below you’ll see the credit card statement Sally receives in the mail each month:
There are several key parts to this credit card statement:
- Current credit card balance – This is the total amount of money Sally would need to send to the credit card company in order to pay off her credit card completely.
- Statement balance – This is the amount of money that Sally Spender charged to her credit card during the most recent month.
- Minimum payment – The minimum payment is the minimum amount that Sally needs to send the credit card company to remain in good terms.
- Recent transactions – A list of purchases Sally made most recently with her credit card. Generally, recent transactions include only those made in the previous month.
- Average Daily Balance – The average balance at the end of each day during the month. This amount is multiplied by the interest rate to determine how much interest Sally will pay.
- Periodic Rate – The interest rates charged to each balance. Sometimes credit card balances are charged more than rate. We’ll explain why a credit card company might charge two different interest rates later in the chapter.
Photo by: 401k
