I am so excited to be sharing information on how to read a credit card financial statement because I think it is one of the most useful personal finance skills. There is a lot of important information on your credit card statement and deciphering that information is the key to understanding how best to manage your payments and balances. While every credit card company has a different format and layout, there are certain pieces of information that will be universal to every credit card statement.
Your balance is how much you currently owe on your credit card. This might not reflect the last couple of days of charges depending how long it takes them to go through but you can look to your balance for a realistic idea of where you stand and how much you owe.
Your payment date
Your payment date is the date that your payment is due. I highly recommend setting up automatic payments on credit cards so you don’t have to think about it again. Most credit card companies will send you an email before your payment goes through so you can look the statement over for any fraudulent or incorrect charges.
While you actually owe your credit card company the total balance on your credit card, they will allow you to maintain a balance on your card if you make a minimum payment on the payment date. When you pay the minimum payment it works to their advantage as they get to charge you interest. Still, making at least the minimum payment is very important because if you don’t pay it on time you will incur a late fee and can even get a ding to your credit score.
Balance last statement
Balance last statement is the amount you owed as of the last billing period. If you take your balance last statement and add the amount you charged to your card over the recent month you should get to your current balance owed. You can use this number to check in and see if you are spending similar amounts month to month or if your spending is going up.
Total credit limit and available credit
Your credit limit is how much of a balance the credit card company is willing to give you on a card. For example, if your credit limit is $10,000, then you cannot hold a balance or even reach a balance of over $10,000. At a $10,000 balance you would be maxed out. Your available credit is how much credit you have left on your credit card before you reach the credit limit. If you have a $5,000 balance and your total credit limit is $10,000 then you would have $5,000 of available credit. Keeping a low balance relative to your total credit limit is important for your credit score. Credit agencies might think you are overextended if you are getting close to the total credit limit on your credit cards each month and this will affect your credit score.