Understanding Your Credit Card Statement

Have you ever wondered why it’s so easy to use your credit card, yet so difficult to decipher your monthly credit card statement?  

The sheer amount of numbers, percentages, and fine print scattered over multiple pages of your credit card company’s letterhead is enough to make your head spin.  

Before you get too twisted up in your next bill, take a little time to understand your credit card statement.  

What’s a Credit Card Statement?

A credit card statement — commonly called a credit card bill — is a summary of all the activity that took place on your credit card account during the previous 28- to 31-day period known as a billing cycle. Your credit card company sends these statements either electronically or through the mail (or both) each month to remind you it’s time to make a payment on your account.

How to Read a Credit Card Statement

At first glance, credit card statements can be a bit overwhelming. They’re typically two or more pages filled with numbers, dates, account details, and explanations.  

Once you start receiving a credit card bill, you’ll quickly learn to scan the statement for the three main sections that contain the most important information.  

Account Summary

Although the layout of credit card statements may vary slightly among credit card issuers, you’ll typically find the account summary located near the top of your bill. The account summary provides a snapshot of your credit card account activity, including: 

• Balances. A balance includes all money in and out. A “previous balance” shows the total balance that appeared on your last bill and the “new balance” refers to the credit card balance at the time the statement was issued.   

• Purchases. Your credit card bill lists the total amount of all purchases you made during the billing cycle, whether it was in person, online, or over the phone.  

• Payments and credits. Your statement outlines any payments or other credits (i.e., returns, rewards, etc.) made to your account during the previous billing cycle. 

• Interest charges. Interest charges will be applied to any portion of your previous credit card statement that wasn’t paid. 

• Fees. Your card issuer may charge credit card fees for a variety of reasons, including late payments, cash advances, balance transfers, and annual use. 

Payment Information

The payment information section of your credit card statement will also be printed near the top of your bill. You should take note of:  

• Minimum payment due. Typically calculated as 5% of your credit card balance, the minimum payment due is the lowest amount of money you can pay on your credit card statement without incurring fees and penalties.   

• Due date. The due date is the last day you have to make at least the minimum payment on your credit card bill before facing a late fee and other penalties.  

• Late payment warning. This notice, which is required under the Credit CARD Act of 2009, shows the late fee and “penalty APR” that could be applied to your account if you’re late making a payment on your bill.  

• Total minimum payment warning. This section highlights how long it will take to pay off your balance and the amount of interest you’ll owe if you only make the minimum payment each month.  

Transactions

The transactions portion of your credit card statement provides a detailed breakdown of all the charges, payments, credits, cash advances, and balance transfers made to your credit card account during the billing cycle. This typically includes: 

• Transaction date. The date a charge or payment was made on your credit card account.  

• Posting date. The date (usually a day or two after the transaction date) a charge or payment on your credit card account is processed by your credit card company and considered final.  

• Merchant name. The name of the vendor who accepted your credit card as payment for a product or service. 

• Amount. The cost of each product or service paid for with your credit card (including tax).  

• Account number. A shortened version — usually the last four digits — of your credit card account that identifies which card was used for the transaction. 

• Reference number. A unique number given to each charge or payment that you can reference when addressing specific questions or issues with your credit card. 

You should always check the transactions on your credit card bill to verify that all the charges are legitimate. If you find purchases you didn’t make, notify your credit card company immediately to dispute the change and ensure you haven’t been a victim of credit card fraud.  

This section of your statement also provides valuable insights into your spending habits. Seeing where and how much you’re charging each month can help you create a personal budget and ultimately manage credit card debt more effectively.    

Credit Card Statement Balance vs. Current Balance

Although easy to confuse, your credit card statement balance and current balance are two different things.  

Statement Balance

Your statement balance is the amount you owe at the end of your credit card’s most recent billing cycle. It includes all purchases, payments, and credits made to your credit card account during that period, as well as interest, fees, and penalties (if any) associated with a balance that carried over from your previous bill.  

Once the billing cycle closes and the statement balance is calculated, it won’t change until the next closing date. Any transactions made with your credit card or that post to your account after the statement closing date will be added to your current balance and appear on your next credit card bill.  

Current Balance

In the simplest of terms, your current balance is a running total of all charges, payments, interest, and credits on your credit card account. It’s a real-time view of what you owe.  

If you use your credit card frequently, the best way to get a true reading of your current balance is to check your credit card account online. As soon as a purchase or payment posts, the current balance will adjust up or down to reflect the transaction.  

Statement Date vs. Due Date for Your Credit Card

Your credit card statement date is the last day of your billing cycle. This is the day each month when your credit card company: 

• Calculates interest charges and minimum payments for your credit card account  

• Creates your credit card statement and posts it to your online credit card account or mails a paper bill (or both) 

• Records your statement balance and payment information, which is eventually reported to the three national credit bureaus (Experian, Equifax, and TransUnion) and used to update your credit report  

Any purchases, payments, or credits made to your credit card account after the statement date will be added to your current balance and appear on your next credit card bill.  

Your due date, on the other hand, is the last day you have to make at least the minimum payment on your credit card bill before facing a late fee and other potential penalties.  

By law, your credit card company must allow a minimum of 21 days between your statement date and due date for you to pay your new bill before it can be considered late. This is known as a grace period, during which time you can’t be charged interest on new purchases that were made during the last billing cycle. 

Should You Pay Off Your Credit Card Before the Due Date?

As a rule, you should try to pay your credit card statement balance on time and in full each month. This keeps you from being assessed interest and other fees on the part of the statement balance that carries over to the following month.  

Paying off your monthly statement balance can also help you: 

• Maintain a better credit utilization ratio  

• Build credit or improve your credit score  

• Manage credit card debt more effectively 

If you can’t afford to settle the entire statement balance, pay as much as you can — provided it’s equal to or more than the minimum amount due. 

In some cases, you may want to pay your credit card bill early or make an additional payment during the month. Either approach may help to boost your credit score, reduce the total amount of interest you have to pay, and avoid late payment penalties. 

What’s a Statement Credit?

A statement credit is money that your credit card company applies to your credit card account by deducting it from your account balance. Statement credits, which appear on your credit card bill as a negative number, are commonly issued for: 

• Returns. When you return items purchased with your credit card, the merchant refunds the money as a statement credit. Returns usually take a few days to post to your account.  

• Rewards. Many rewards credit cards allow you to exchange loyalty points, travel miles, or cash-back offers for statement credits 

• Chargebacks. If you dispute a charge on your credit card statement and have issues resolving it with the merchant, your credit card company can reverse the charge, which is known as a chargeback.   

It’s worth noting that even though statement credits reduce your overall credit card balance, they don’t count toward your minimum payment. Unless the statement credit is large enough to eliminate your entire balance (which is rare), you still have to make at least the minimum payment on your account each month.  

How Long Should You Keep Credit Card Statements?

Unlike W-2s, tax returns, and other financial records that you should hold onto for years, you only need to keep your credit card statements for 12 months or less.  

Generally, it’s safe to shred your old credit card bills once you reconcile all the transactions with receipts you have for individual purchases, payments, and other activity.  

How to Check Your Credit Card Statement

Although the “traditional” way to receive your credit card statement is through standard mail, you can have your bill sent electronically — or choose both methods. You can also create an online account with your credit card company, which allows you to manage your account, make payments, and access current and past statements from wherever there’s Wi-Fi.  

The Takeaway

Your credit card statement doesn’t have to be difficult to understand. By learning how to read and apply the information in your monthly bill, you can use it for what it’s intended to be: a valuable tool that can help you make better financial decisions.