Understanding Your Credit Card Statement

The monthly credit card statement is one of the most commonly overlooked financial documents we receive. Why? It could have something to do with the high volume of information that is ‘squished’ into a small page of paper. It could be the complexity of the information provided. It could be the small font size used. Regardless of the reason, it is time to take a closer look. Although statements from different companies will look slightly different, there are many common elements [here are a few]:

Monthly Charges.
Reviewing your monthly charges is very important. The most obvious reason is to make sure that your actual expenses match what the credit card company is reflecting (mistakes do happen); but this will also alert you to fraudulent charges as identity theft is becoming a bigger problem by the day. By law, you have 60 days to dispute [in writing] errors on your credit card statement.

Minimum Payment.
This is the smallest payment (normally 2% - 4% of your balance) your credit card company will allow you to make and remain in good standing. Making this payment on time is important for maintaining your credit; ideally you will pay the balance in full and thus avoid all interest charges.

Interest Rate/Annual Percentage Rate (APR).
Most of us are familiar with the interest rate – the amount of interest paid per month typically stated as an annual rate. The APR, however, documents the “bottom line” cost you’re paying for your card. The APR includes not only interest charges, but also fees [such as late and over-limit] and other transaction costs.

Grace Period.
This is the “free” period of time that you can avoid interest charges by paying your balance in full each month. The law requires the grace period to be minimally 14 days (meaning that the bill must be mailed at least 14 days before the due date). Most cards have grace periods of 20-25 days. If you fail to pay your balance in full, you will forfeit the grace period (in addition, most cards will forfeit your grace period when cash advances, balance transfers, or convenience checks are used – even if you paid the balance in full the prior month).

Credit Card Limit/Available Credit.
This is the maximum debt allowed by the credit card company on the particular card. Your maximum credit as well as your available credit (maximum credit minus current balance) will be listed on each statement. Keep an eye on your limits – card companies will regularly increase your limit when you pay on time as they want to encourage you to spend more. You can call and request that they lower your limit if you’d like.

Owning a credit card includes with it the responsibility of learning how to use the credit card. Understanding the monthly credit card statement is essential to your success as a consumer. Take the time to review the information on your credit card statement and seek assistance if you have questions/concerns/problems.

Legislative Information for Current Students ...

It wasn't long ago that I sent a weekly tip regarding the legislation that locked the interest rate on all Stafford Loans [taken out after 7/1/06] at 6.8%. Well ...

This week [expected tomorrow], the new House of Representatives leadership plans to introduce legislation that would cut the interest rate on certain student loans in half!

The Project on Student Debt has prepared a brief analysis of this bill, which would reduce interest rates on Federal Subsidized Stafford Loans for undergraduates from the current 6.8% to 3.4% over the next five years. When fully phased in, borrowers on a 10-year repayment plan would see their payments reduced by 14% and save $4,000 in interest costs on $20,000 in covered loans.

The proposed interest rate phase-in would occur according to the following schedule:
6.12 percent in 2007
5.44 percent in 2008
4.76 percent in 2009
4.08 percent in 2010
3.4 percent in 2011 and subsequent years.

To read more ...
- Project on Student Debt
- Inside Higher Education