credit card statement

Jul

2021

Understanding Your Credit Card Statement Part 3

Reading Time: 3 minutes

There is a price for borrowing money. Aside from the annual membership fee, one of the most important things that you should consider is the interest. This is how the credit card issuer earns money. Understanding the different credits and debits that go in and out of your credit card statement is one of the skills that you need to be able to use your card wisely. Don’t just swipe, understand how your credit card works. Here is understanding your credit card statement part 3.

9. Interest Rate

The interest rate is the cost of borrowing money. The interest is applied only to your balance. Different cards have different interest rates. Card issuers use different calculations. Some credit cards issuers calculate it based on your average daily balance. Some use the balance on the beginning or the end of the cycle. You will need to read the fine print to understand how your credit card company calculates the interest.

TIP: You can avoid paying interests by paying the total amount due on each billing cycle.

10. Cash Advance Interest Rate

Aside from the cash advance fee, there is a separate interest for your cash advances. This is typically higher than the interest rate of your regular purchases.

TIP: Cash advance interest rate is not only higher than normal transactions, it is also automatically charged as soon as you withdraw the cash. Avoid this by using the cash advance feature of your credit card only when absolutely necessary.

11. Previous Balance

The previous balance pertains to your outstanding balance from the previous month’s statement. Interest starts the end of the beginning of the billing cycle if you have a previous balance.

For example if you have a 5,000 outstanding balance from the previous billing and you paid 4,000 last month. You will then have 1,000 balance at the end of the beginning of the current month cycle. This means the interest will be calculated on the 1,000 balance at the start of the billing cycle.

TIP: Always make it a point to have zero balance at the end of the beginning of the billing cycle so you don’t need to pay any interest.

12. Purchases and Advances

This pertains to all your credit card purchases and cash advances that falls within the billing cycle. The billing cycle is the period after the statement date from the previous month to the statement date of the current month.

TIP: Make sure to keep all your credit card receipts so you can verify the transactions in your credit card statement to avoid paying for double entries or purchases that you did not do.

13. Credits

Credits are any amount that the card company owes you. It could be price of something that you returned that you originally purchased using your credit card. It could be wrong entries or items that you did not actually purchase.In addition, it could also be credit card points that you redeemed in exchange for cash credits.

TIP: Be consciously aware of your purchases and if you are expecting credits into your account. Ensure that the correct amount has been credited.

14. Payments

Payments are the amount of money that you pay the credit card for your purchases. Any payment you made will reduce your outstanding balance.

TIP: Double-check all payments credited to your account to make sure it is the correct amount.

15. Interest Charge

This is the total amount of all the interests that were charged to your account. It is the sum total of the interests on purchases, cash advances and balance transfer.

TIP: Although you can avoid paying interests on purchases if you pay within the grace period; you cannot do the same with cash advances and balance transfers because they are automatically charged right after the transaction.

16. Late Charge

Late Charges are the amount that you need to pay as penalty for not paying at least the minimum amount due before the due date.

TIP: Avoid paying late charges by paying your dues on or before the payment due date.

Third Part of a Series. Click here to read Part 1.

First Published in Pinoy Smart Living on 04.06.2019

Feature Image by Alina Kuptsova from Pixabay

Jul

2021

Understanding Your Credit Card Statement Part 2

Reading Time: 2 minutes

Credit cards are a good way to build your credit score standing. Banks and other lending institutions use credit scores to assess and evaluate the potential risk of lending you some money. That’s why it is important that you use your credit card wisely. The only way to achieve this is by understanding your credit card statement and how it works. In this second part of the series, let’s focus on the credit limit. Below is a list of additional terms and description in understanding your credit card statement part 2.

Understanding Your Credit Card Statement Part 2

Credit card issuers put credit limits on your credit card for a good reason. The limits are there to benefit both you and the credit card issuer. The amount is based on a computation that it is easy for both parties to manage the credit. Your limits are normally based on your capacity to pay. Being consciously aware of these limits will help you be able to utilize your credit card well.

5. Credit Limit

Your credit limit is the maximum amount that you can borrow on your credit card every cycle. The amount is decided by the credit card issuer based on certain factors such as your monthly income, credit score and account history.

TIP: Keep your credit limit in check. Going over your credit limit will result to hefty penalties and affect your credit rating.

6. Overlimit Amount

Any amount in excess of your credit limit is the overlimit amount. The overlimit amount is subject to penalties. It is also added up to your minimum amount due.

TIP: Avoid the embarrassment of an unapproved or declined transactions by making purchases above your credit limit. In addition, do bear in mind that there are penalties when you go above your credit limit. And besides, going above your credit limit means your credit card usage is already more than your capacity to pay.

7. Available Credit Limit

This is the amount available for you to spend. It is actually your credit limit minus your total amount due less any other pending transactions.

TIP: It is advisable to always have an available credit in your credit card for emergency purposes. In addition, having a lot of available credit limit at any given time is good for your credit score.

8. Cash Advance Limit

The cash advance limit is the maximum amount that you are allowed to withdraw in cash. Some credit cards have the same credit limit and cash advance limit while others set a separate amount for cash advance.

TIP: Never use the cash advance feature of credit card unless you really need to or there is urgency in the situation. Although it is a convenient way to get cash fast, the interest rate for cash advance is much higher compared to personal loans.

First Published in Pinoy Smart Living on 28.06.2019

Feature Photo by Andrea Piacquadio from Pexels

Jul

2021

Understanding Your Credit Card Statement

Reading Time: 3 minutes

Many people have the bad habit of not reading their credit card statements. For those who do read, how many really understand what it all means? It is because of this that many people found themselves in credit card debts that have already escalated beyond their control. Don’t be one of these people. Understanding your credit card statement is crucial to your journey towards financial freedom. Use credit cards to your advantage. Learn how credit cards work.

To truly understand how a credit card can be good for you, you need to first be able to read and decipher your credit card statement. The small pieces of information in your credit card bill are all equally important. They can aid you with proper use of your credit card.

If learning about all those terms in your credit card statement all at once is too much for you to handle, at least start with the four most important ones:

1. Statement Date

This is the date that your billing statement is prepared. The date is important simply because it is the cut-off date. All transactions made after the previous month’s statement date to the date indicated are included in the statement.

TIP: If you think you have already reached the limit of your monthly expense budget, wait until after the statement date to make your purchase. In this way, you will have more than a month of grace period before you need to pay for that particular purchase. For example; if your statement is generated every 5th of the month, items that you bought before the 5th will be billed this month. Purchases after the statement date are for next month.

2. Payment Due Date

The payment due date is the last day for you to make your monthly payments. As long as you have a balance in your credit card, you are obliged to pay every month on or before this date. Although some credit card companies accept payments on the next banking day after a weekend or a holiday; some no longer do so because of the presence of automated online payments or phone banking.

Take note however that the payment due date varies. Rather than a specific date of each month, it is normally set at 21 days after the statement date.

TIP: Make sure to pay on time so as to avoid penalties and late charges. You can opt to pay early but make sure you do it after the statement date otherwise, that payment would be counted on the previous month’s billing cycle. Also, always take note of the due date because it varies every month.

3. Total Amount Due

This pertains to the total amount that you have used in your credit card that you are liable to pay the card issuer. It is your outstanding balance.

TIP: Although you are not required to pay the full amount on the payment due date; it is in your best interest that you do so. Any outstanding balance will begin to incur high interest charges.

4. Minimum Amount Due

The minimum amount due is the lowest amount that you are required to pay on or before the payment due date. It is typically a small percentage of your outstanding balance. This is directly proportional to your total amount due. The higher your outstanding balance, the higher your minimum amount due and vice versa.

TIP: Never miss paying your minimum amount due on or before the payment due date. You will not only be subjected to late charges, it will also affect your credit rating. Missed payments will affect your standing with credit institutions and might ultimately affect your capability in acquiring loans in the future. In addition, even if you pay the minimum amount, if you continue to make purchases each month, your balance will continue to grow. This is the fastest way to put yourself in heavy debt. Thus, a word of warning; if you don’t want the power of compound interest working against you, then, refrain from paying just the minimum amount due each month.

First of three parts, click here for Part 2.

First Published in Pinoy Smart Living on 21.05.2019

Feature Image by lcb from Pixabay