Credit cards are a convenient financial tool, but deciphering statements every month can often feel like decoding a foreign language! Failing to understand your statement could lead to unnecessary charges, missed payments, or even a dent in your credit score.
Chartered Accountant Abhay Asknani emphasises, ’A credit card statement is more than just a bill—it’s a financial report. By understanding each section, cardholders can avoid hidden charges, track their spending, and stay on top of their financial commitments.’
To help you get started, here are 10 critical elements to check in your credit card statement every month:
1. Account Overview
The account overview is a summary of your transactions during the billing period. It includes:
• Purchases made
• Interest charges on outstanding balances
• Fees, such as late payment or foreign exchange charges
• Total amount due
• Statement closing date and credit limit
Abhay advises, ’Keep an eye on the closing date, as any transactions after this will appear on the next statement. Logging into your online banking portal is a quick way to check recent transactions in real time.’
2. Credit Limit Availability
Your credit limit dictates how much you can spend. For new cardholders, this limit may be lower, but it can increase over time based on your repayment history.
’Exceeding your credit limit can result in hefty fees or even damage your credit score,’ says Abhay. ’It’s always better to stay well below the limit to avoid falling into a debt spiral.’
3. Payment Due Date
The payment due date is one of the most important details in your statement. Missing this deadline can lead to late fees and interest charges.
Abhay cautions, ’Don’t wait until the last day to pay your bill. If you’re using a cheque, processing delays could lead to penalties. Make it a habit to clear dues early or set up automatic payments to avoid complications.’
4. Total Amount Due
The total amount due includes:
• The balance carried forward from previous months
• Interest charges on unpaid amounts
• Service fees, penalties, and other charges
’Paying only the minimum amount due can be tempting,’ explains Abhay, ’but this means interest will keep piling up on the unpaid balance. It’s best to clear the full amount each month to maintain financial health.’
5. Minimum Amount Due
If paying the total amount isn’t possible, credit card issuers allow you to pay a minimum amount, typically 3–5 per cent of the total due.
Abhay notes, ’While this option can prevent late fees, it’s not a long-term solution. Paying only the minimum means you’ll incur higher interest charges, and the debt will take much longer to clear.’
6. Banking Fees
Sometimes, your statement might show a higher amount than expected due to additional banking fees, such as:
• Late payment penalties
• Cash advance fees
• Foreign transaction fees
• Over-limit charges
’Watch out for these charges and evaluate if they’re avoidable,’ says Abhay. ’For instance, using your card for cash withdrawals should be a last resort, as cash advances attract high fees and interest rates.’
7. Grace Period
The grace period is the time between the end of your billing cycle and your payment due date, usually 20–25 days. If you pay your bill in full within this period, no interest will be charged.
Abhay adds, ’If payment is delayed beyond three days after the due date, banks are allowed to charge interest as per RBI guidelines. Always aim to settle your dues before the grace period ends.’
8. Notice Of Late Payment
Your statement will include a warning if you’ve missed payments, encouraging you to at least pay the minimum amount to avoid late fees. It will also specify the penalties you may incur for further delays.
9. Reward Points Or Cashback
Many credit cards offer reward points or cashback on purchases, which are summarised in your statement.
Abhay advises, ’Monitor your reward points and redeem them before they expire. These benefits can translate into savings, especially if you use your credit card for regular expenses.’
10. Transaction Information
The transaction section lists all the purchases, refunds, and adjustments made during the billing cycle.
’Reviewing this section is crucial,’ says Abhay. ’It helps you spot any unauthorised charges, duplicate transactions, or errors that need to be reported to your bank immediately.’
Why Reviewing Your Credit Card Statement Matters
Understanding your credit card statement is more than just a financial chore—it’s a proactive way to manage your money. It helps you:
• Avoid Hidden Charges: Spot unexpected fees and rectify errors promptly.
• Track Spending: Gain insight into your spending habits and set budgets accordingly.
• Maximise Benefits: Make full use of cashback and reward points.
• Improve Financial Health: Pay off your balance in full to avoid interest and maintain a good credit score.
As Abhay sums up, ’A credit card statement is not something to glance over casually. It’s a financial roadmap that helps you navigate your spending and avoid pitfalls.’
So, the next time your credit card statement lands in your inbox, take the time to review it. Your wallet—and your future self—will thank you!