When you want to build your credit profile, the best thing to start with is a credit card. You need no credit history to apply for it and can use it to develop a good credit score for yourself. So if you are one of those who recently started using a credit card, the first thing you need to learn is how to read your credit card statement.
Banks are obligated by the law to send monthly statements to their credit card holders either on their registered e-mail ID or at their residential address, as requested by the user. A credit card statement includes a whole lot of information which can be confusing for a first-time user.
So let us talk about these sections in some detail-
Due Date for Payment
The first and the most important thing in your credit card statement is the payment due date. If you delay the payment of your outstanding amount post the mentioned date, two types of charges will be levied. First, you will have to pay the interest on the outstanding amount and second, the late payment fee will also be levied. Interest is charged as a percentage of the outstanding amount whereas the late payment fee is usually a fixed amount and it may differ from bank to bank. Remember, the late payment fee will be charged only if you fail to pay the minimum amount due.
Failure to pay even the minimum amount due will be shown in your credit report which, in turn, will result in lowering of your credit score. Late payments are shown in the DPD (Days Past Due) section of your credit report.
Minimum Amount Due
Credit card companies allow their customers to pay a minimum amount due if they cannot afford to pay the entire outstanding amount. This is a small fraction of the total outstanding amount on your credit card. If you manage to pay the minimum amount, no late payment fee will be levied. However, you will have to pay the interest on the remaining outstanding balance for the time it stays in your statement. The late payment fee may range from Rs 100 to Rs 1,000, depending on the total outstanding amount and the policy of your credit card provider.
Ideally, you must pay the total outstanding amount per month in order to avoid any extra charges. The total amount includes all EMIs that you have to pay along with the charges levied in the given billing cycle.
On your credit card statement, you will find three types of limits mentioned-
- Total Credit Limit
- Available Credit Limit
- Cash Limit
Total credit limit shows the amount that was sanctioned to you by the bank on the given credit card. The amount shown in the available credit limit section is the amount left after you have made purchases on the card. It is the amount you can still utilize. As you make regular EMI payments, it is added to the credit limit available with you. Some cash limit is also provided to the card users and it is usually a portion of the available credit limit. You can utilize the credit limit through any medium like online shopping, bill payments, etc. whereas the cash limit can only be utilized for withdrawing money from the ATM.
Reward Point Balance
The credit card statement will also show the reward points that you have accumulated so far along with its status. Here you will find a detailed table containing the number of reward point balance carried forward from the previous cycle, points earned in the current billing cycle and the points lapsed.
You will also find a summary of your credit card balances in the monthly statement. This section shows your opening balance which is the limit you have in your credit card at the start of new billing cycle, the amount you have spent in the current cycle and the payments that you have made towards the card plus any extra charges levied in the current billing cycle. It is a quick view of your credit card for the current period.
You can also have a detailed look at the transactions you made during the given billing cycle. This segment includes the date and time of the transactions, amount that was deducted, any extra charges, place of transaction, etc. You must check this section carefully and inform the bank in case you doubt a discrepancy.
Besides these, your credit card statement might also show the details of relevant changes that the bank may have effected like any interest rate fluctuation, tax rate changes, etc. It is important to check each and every part of your statement thoroughly and contact your bank in case of doubts. Staying informed is always better than regretting later.