Take these steps to keep track of how much you’re charging to credit cards:
- Sign up for alerts. Most credit card companies allow you to sign up for email or text alerts when your monthly balance reaches the credit limit or a certain threshold that you establish.
- Check your balance weekly. Don’t wait for your monthly statement to arrive. Go online and check your transactions at least weekly—more often if overspending is a problem for you. You’ll stay on top of spending and be better able to identify early signs of fraud.
- Categorize your spending. Many credit card statements break down your purchases by category, such as dining, health care and travel. Some allow you to set up your own categories. This way, you can see at a glance how much of your hard-earned money is going toward certain expenses each month and where you might need to cut back.
- Tap into technology. Online money-management programs, accounting software and mobile apps can automatically track credit card purchases, alert you when spending reaches a certain limit and notify you of payment due dates.
Minimum Payment vs. Statement Balance
The minimum payment on your statement is usually a percentage of your statement balance. While percentages differ by card issuer, 2% is common. Your statement balance, on the other hand, is the balance on the account the day the statement is issued. Note that if you use your card often, the balance on your statement may be less than your total balance that you’ll see when you log into your account, because it also takes into account new transactions that occurred after the previous billing cycle. Here is an example:
|Billing Cycle||Statement Balance (or “New Balance”)||Minimum Payment||Current Balance (as of 2/20/15)|
In this example, the current balance includes a $10 transaction made after 2/13/15.
In order to avoid interest charges on purchases, you’ll need to pay the statement balance (or $2,139.13) in full.
The minimum payment information on your monthly credit card statement shows how long it will take to pay off the current total balance, as well as how much interest you’ll pay if you only make the minimum payments each month and add no extra charges to the card. It also illustrates how paying a different, higher amount can lead to a quicker payoff and less interest. Whenever possible, you should always pay more than the minimum balance.
Use this credit card payoff calculator to see what it will take to pay off your credit card balance, and what you can change to meet your repayment goals:
Reading Your Statement
It’s important to review your credit card statement every month to check for billing errors or unauthorized charges. While statements may vary slightly depending on the credit card you have, here is generally what you can expect to find:
Summary of Account Activity
Totals up any Previous Balance, Payments Made, Other Credits, Purchases, Cash Advances, Fees and Interest Charged to show you the resulting New Balance; may also include any Past Due Amount.
Also displays your Credit Limit, amount of unused or Available Credit, your Statement Closing Date and the Days in Billing.
Includes your New Balance, the Total Minimum Payment Due and Payment Due Date. This section should also include the Late Payment Warning, telling you how much a credit card company can charge if you don’t pay the bill on time and/or the Minimum Payment Warning, showing how long it will take to pay off the current total balance, as well as how much interest you’ll pay, if you only make minimum payments each month and add no extra charges to the card.
Includes a record of all transactions for the billing cycle, including purchases, cash advances and payments; double-check this section for possible fraudulent activity or incorrect charges.
Includes phone numbers, website addresses and physical addresses where you can go for more information or to submit payments.
This section repeats your current payment information and is intended to be sent back with your payment if you pay by mail.
Your statement will likely include additional sections such as those detailing ways to dispute charges or request corrections, showing the amount of fees and interest you’ve accumulated during the year and outlining the amount of interest charged during the billing cycle by transaction type, such as purchases and cash advances. If you have a rewards credit card, your statement should also include a summary of your earnings.
How Payments Are Allocated
Your credit card balance may include balances at different interest rates, such as purchases and cash advances. If you pay more than the minimum payment, your payment will be applied to your account in this way:
- Generally, the minimum payment will be applied first to your interest charges, any fees and then to the lowest-APR balance.
- Any amount above the minimum balance must be applied to your balances in order of highest to lowest APR. This helps you pay less in interest overall.
- If APRs are the same, payments will generally be applied to previous cycle balances, followed by current cycle balances.
Always check your credit card agreement or contact your card issuer if you have questions about your payments. Keep in mind that payments are due on the due date—if you’re mailing a check, you’ll need to be sure to mail your payment in time for it to arrive on or before the due date. It may take a few days for your card issuer to post your payment to your account; however, it should be posted effective as of the date it was received.
A smart way to make sure that you never miss or are late paying a credit card bill is by using online bill pay and setting up monthly automatic payments. On the payment due date, or on an earlier date that you choose, your credit union or bank will transfer funds from your account to the credit card company. You can make minimum or full payments (or some amount in between). However, you must pay at least the minimum amount. You can cancel automatic payments or change the payment amount or date at any time. You can also make extra payments to pay off the debt faster.
Even with automatic payments, you still need to monitor your account. It’s important to make sure you have the funds in your checking or savings account to cover the withdrawal when the payment date arrives. Also, check your credit account to make sure the payment was applied.
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