Trent Hamm* says there are eight important things that everyone should look at when checking their credit card statement.
When most of us open up our credit card bills, the first thing we notice is the minimum payment — after all, that’s the amount that needs to be paid by the due date or else we’re facing extra late fees.
We also look at the total amount owed, particularly if we’re practicing responsible credit card use and pay off our cards in full each month.
However, a credit card statement contains a lot of additional valuable information that’s well worth sitting down and examining.
Spending a few moments with your credit card bill can quickly reveal a number of things that can have a pretty big impact on our financial lives.
The next time you open up your credit card statement, make sure you take note of these eight things.
Charges that you don’t recognise
Go through the list of charges carefully and make sure you recognise those expenses.
If you find some that you don’t recognise, spend a moment or two identifying what exactly those charges represent.
You may find that you didn’t authorise those charges at all.
This is often how people notice subtle identity theft.
Many identity thieves put occasional small charges on credit cards that the customers don’t even notice to slowly withdraw money or to identify cards that can be exploited.
If you’re sure you didn’t authorise a particular charge, get a hold of your credit card issuer immediately.
You may need to have a new card issued with a new number.
Alternatively, your issuer may be able to uncover more details about that unknown expense that will help you identify it.
Charges that you do recognise, but now regret
At the same time, you may notice charges that you recognise but had forgotten about over the last month.
Spend some time looking at those charges and asking yourself whether they were really worthwhile. Do you now regret those expenses?
If you find that, in hindsight, those expenses weren’t good choices, this provides a great opportunity to reflect on your spending choices going forward.
For example, if you notice that you’re frequently spending $10 at a nearby convenience store for completely forgettable junk food, it might be a sign that you need to change your habits for both financial and health reasons.
Credit utilisation ratio
Take a moment and look at your total balance and how it compares to your available credit.
It’s healthy for your credit score to have an available credit that’s higher than your total balance.
The ratio of your total balance to your credit limit is known as your credit utilisation, and it’s good for it to stay below 30 per cent — but at the absolute max, below 50 per cent.
The quick way to check that is to just compare your current total balance and your available credit.
If your available credit is higher, you’re in good shape.
If your total balance is higher, you need to dial back on your credit card use unless you’re paying your balance in full each month.
It’s a simple and convenient way to estimate your credit utilisation, which is a key part of your credit score.
How long until you pay off the card
Credit card statements usually include a line that tells you how long it will take for you to pay off your card in full if you just make the minimum payments.
If you simply make the minimum payments each month, take a long hard look at this line.
This is how long you’re going to be on the hook for a monthly credit card bill.
For many people, realising how long they’re going to be paying down their credit card bill is a wake-up call that nudges them toward more responsible credit card use.
If you’re going to be paying down your bill for 10 or more years, it might be a moment to start changing your credit card usage behaviour.
Points or other rewards balances
Many credit cards generate points or rewards in some fashion.
The Amazon Rewards Visa card generates Amazon.com rewards credit as you use it over time, and the Citi Rewards+ MasterCard generates points that can be used in its rewards program.
It can be easy to just forget about these rewards points over time, so it’s a good idea to check your statement and make sure you’re aware of how much you’ve accumulated.
This is particularly true for some cards in which unused points may expire.
Account changes
Credit card companies are required by law to notify you of account changes in writing 45 days before those changes occur.
Those changes are usually included in your monthly statement in a separate section, which should be easy to identify.
Usually, this is where you’ll find out about things like a change in your interest rate and changes to your rewards program.
Those changes might alter your choice to continue using this card and may send you on a search to find a card that better matches your needs.
Minimum and late payment warnings
It’s a good idea to examine the bill and look for minimum and late payment warnings.
Ideally, you shouldn’t see these, but if you didn’t make a minimum payment last month, you’ll see a warning for that, and you’ll also see a warning for late payments.
Usually, when these first pop up, they’re outlining the consequences of continued late payments or not paying the minimum amount on a bill.
Often, these are charges that will be tacked on in the future, or interest rate adjustments, provided you don’t fix the issue.
Transaction and penalty fees
Credit cards can actually ding you for a surprising array of things.
Some are innocuous, like an annual fee on a great rewards card, while others can be painful, like a transaction charge if you used your credit card to get cash out of an ATM. You can also see fees for things like a rejected payment.
While most of these extra fees should be self-explanatory, it’s still a good idea to review them.
You may find fees that you don’t think should apply to you, which means you should call the credit card issuer.
You may also see fees that show you the real impact of financial missteps, as a reminder to improve your financial state.
Too long, didn’t read?
Your credit card statement provides a lot of useful information beyond your minimum payment and how much credit you have left.
It can help you identify identity theft, figure out whether your card is negatively impacting your credit score, help you figure out specific poor spending choices, and also help you avoid unnecessary fees.
It takes just a few minutes to give your credit card statement a healthy review, and the information you uncover can have a profound positive impact on your financial life.
*Trent Hamm is the founder of The Simple Dollar.
This article first appeared at thesimpledollar.com
