Credit Card statements: Don't forget to read the fine print
By Andrew Housser
If someone gave you the opportunity to spend about five minutes per month to better understand your spending, avoid fraud and find ways to save money -- from tens to hundreds of dollars -- would you take it? Most people would say yes. And yet those same people actually miss this chance when they skim over their credit card bills -- or worse, do not even open their statements.
Reading a credit card bill is easy to do. Yet the monthly statement sometimes intimidates people. Follow this checklist the next time you open or download your statement. You'll learn about your finances and potentially learn how to save money and get out of debt faster.
1) Read the account highlights section.
Credit card statements always have an "account information" or "account summary" section that shows the most important parts of the bill. This includes how much you owe, when the payment is due, and how much you are paying in interest fees. Circle or highlight the due date. Ideally, write a check or enter an online payment as soon as you receive the bill to avoid late fees.
2) Check the interest rate.
Credit card statements must clearly show the interest rate (the Annual Percentage Rate or APR), interest charged during this billing period, and total interest paid for the year to date. Lenders must notify you before they change the interest rate. Sometimes a rate changes as part of a condition to which the borrower has previously agreed, such as the end of a promotional period. Other times, it may change if you have gone over your credit line or paid late, as outlined in your agreement with the credit card issuer. If you do not understand the change, contact the lender to ask about it.
3) Review any fees charged to your account.
A box on the statement lists total fees you have paid for the year. Some cards have an annual fee once per year (mark the date on your calendar to confirm when it will be charged). Other potential fees are late-payment fees, over-limit fees, or returned-payment fees. These last three would be charged only if you are not handling your account properly. Sometimes, a credit card company will refund late or over-limit fees if you are a good customer of long standing. But if you accrue these fees, you likely are impacting your credit score, not to mention wasting money. Change your behavior so you don't incur these fees.
4) Be sure payments posted correctly.
Check account activity to confirm that your payments were credited to your account properly. Watch the "payments and credits" section as well to ensure that any credits -- such as for merchandise you returned to a store that was credited to your account -- have been posted correctly.
5) Review all account charges.
Check more than your statement balance. Always review all account activity carefully. Be sure you recognize every charge on a statement. Identity thieves often begin by making a few small charges to test an account. If you find a transaction you do not recognize, address it right away. Some bills include a phone number for the merchant, who might help you verify the charge. If you cannot verify a charge, contact the credit card company. The company can begin an investigation into the charge. Meanwhile, you will not be liable to pay these charges.
6) Dispute fraud in writing.
If you do have a charge that you did not make, you must notify the credit card issuer that you are disputing a transaction within 60 days of the error, according to the Fair Credit Billing Act. Send your letter via certified mail to obtain proof of delivery. The credit card company is legally required to verify and/or correct the billing error within 90 days of receiving your written notice. If you need to report unauthorized use, calling the credit card company is the fastest way to cut off a thief.
7) Understand the effects of how much you pay.
Be sure to look at the chart that shows how long it will take you to repay your balance if you pay only the minimum. The chart also shows how much to pay each month to eliminate the balance in three years, and how much you will save in interest by doing so. This chart is great inspiration to pay as much as possible each month. Note that you can only meet the provided schedule if you stop charging and add no more to the existing balance.
8) Know what happens if you pay late.
Statements now must explain the consequences of paying late. Doing so usually triggers a fee. It also can raise your interest rates for at least six months, and late payments damage your credit score.
Credit cards are useful tools, but they can create problems for many people. Be honest with yourself, and take the small steps necessary to keep your debt manageable. Learning to read and use your credit card statement is a very important first step.