Many people have the bad habit of not reading their credit card statements. For those who do read, how many really understand what it all means? It is because of this that many people found themselves in credit card debts that have already escalated beyond their control. Don’t be one of these people. Learn how credit card works. Use it to your advantage.
To truly understand how credit card can be good for you, you need to first be able to read and decipher your credit card statement. Those little pieces of information in your credit card bill can help you make good choices with regards to the proper use of your credit card.
If learning about all those terms in your credit card statement all at once is too much for you to handle, at least start with the four most important ones:
1. Statement Date
This is the date that your billing statement is prepared. It is important because all the transactions that you have made after the previous month’s statement date to the current month’s statement date will be included. It is also the date where all finance charges are calculated and included in your statement. Simply put, it is your cut-off period.
Tip: If you think you have already reached the limit of your monthly expense budget, wait until after the statement date to make your purchase. In this way, you will have more than a month of grace period before you need to pay for that particular purchase. For example, if your statement is generated every 5th of the month, items that you bought before the 5th will be billed this month. However, your credit card usage after the 5th will be included in next month’s billing statement.
2. Payment Due Date
The payment due date is the last day for you to make your monthly payments. As long as you have a balance in your credit card, you are oblige to pay every month on or before this date. Although some credit card companies accept payments on the next banking day after a weekend or a holiday, some no longer do so because of presence of automated online payments or phone banking.
Take note however that the payment due date varies. Rather than a specific date of each month, it is normally set at 21 days after the statement date.
Tip: Make sure to pay on time so as to avoid penalties and late charges. You can opt to pay early but make sure you do it after the statement date otherwise, that payment would be counted on the previous month’s billing cycle. Also, always take note of the due date because it varies every month.
3. Total Amount Due
This pertains to the total amount that you have used in your credit card that you are liable to pay the card issuer. It is your outstanding balance.
Tip: Although you are not required to pay the full amount on the payment due date, it is in your best interest that you do so. Any outstanding balance will begin to incur high interest charges.
4. Minimum Amount Due
The minimum amount due is the lowest amount that you are required to pay on or before the payment due date. It is typically a small percentage of your outstanding balance. This is directly proportional to your total amount due. The higher your outstanding balance, the higher your minimum amount due and vice versa.
Tip: Never miss paying your minimum amount due on or before the payment due date. You will not only be subjected to late charges, it will also affect your credit rating. Missed payments will affect your standing with credit institutions and might ultimately affect your capability in acquiring loans in the future. In addition, even if you pay the minimum amount, if you continue to make purchases each month, your balance will continue to grow. This is the fastest way to put yourself in heavy debt.
Click here for How to Read your Credit Card Statement Part 2.