Credit cards can be helpful in building a solid credit profile if a user utilizes them smartly. However, not making repayments on time and having a high credit utilization ratio can lead to said individual eventually falling into a crippling debt trap.
According to a recent report, credit card debts declined by nearly 10% in the June quarter following a nationwide lockdown. Understanding credit card statements have played an essential role in reducing debt as well, as individuals can easily report any unauthorized charges and billing errors promptly.
Understanding your credit card statement
As mandated by law, financial institutions need to send a statement of credit card usage activity to the user. This report can either be electronically generated and sent via email or delivered to one’s residential address, as requested by the user.
A credit card statement contains information such as the unpaid balance, due date, and minimum amount due, understanding which can be tricky for new users. Nonetheless, a responsible borrower should read the fine print thoroughly and understand all the information and numbers on the statement.
Credit card statements also enlist all the charges paid by the user each month. Keeping an eye out for such payments and how to reduce them can be beneficial in the long run as well.
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Prerequisites before checking the statement
Before reading the credit card statement, individuals should make sure that they know the meaning of the following terms.
- Statement generation date
As the name suggests, this is the date on which the statement is generated. If a user defaults on the last payment, this date is selected as the first day for interest calculation. Try to remember the date of your statement and pay the payment within the time limit.
- Billing cycle
The period between two statement generation dates is called the billing cycle. The statement that an individual receives is a likeness of all transactions made during a billing cycle, plus the interest accrued and fees or penalties.
- Grace period
Grace period refers to the time between your statement generation date and the payment due date, where repayments can be made interest-free. Financial institutions usually offer a grace period of about 3 weeks or 20-21 days after the statement date. Before making any repayments, make sure to enquire about the grace period with your issuer.
Key things to check in your credit card statement
One of the first things that one needs to check is his/her transaction history, which is a list of all purchases and withdrawals made during the billing cycle. Make a note of discrepancies, if any, and notify the issuer immediately.
2. Credit limit
An individual’s unpaid credit card bill cannot exceed the set limit. To spend higher than the credit limit, a user needs to first clear any outstanding dues in full. Or he/she can call the financier and ask to increase the credit limit that may be granted if said borrower has a reliable credit history. If you pay your bill on time then it automatically improves your credit limit.
3. Total amount due
This value is the cumulative unpaid balance that an individual needs to repay at the end of a billing cycle. It is the sum of the outstanding amount, interest charged, and any other penalties or charges as applicable.
4. Minimum amount due
Unlike what its name suggests, when an individual pays the minimum amount due, only late payment fees are waivered. The interest on the outstanding balance becomes due instantly, leading borrowers into a debt trap. On a credit card, you get an opportunity to pay the minimum amount on your due dates.
5. Cash advance
This value refers to the ATM withdrawal limit set on your credit card as a percentage of the credit limit available. Keep a note of this value and try not to cross it, as these transactions often come with high-interest rates and charges.
6. Reward points
A credit card statement also contains a rewards points summary, enlisting the points earned in a billing cycle. Borrowers often compare rewards points among the best credit cards in India before applying to a financier for credit cards.
Feature-rich cards like the Bajaj Finserv RBL Bank SuperCard also provides several welcome offers and rewards, thus accelerating your annual savings by up to Rs.55,000.
To further extend convenience and make the process hassle-free, the NBFC also extends pre-approved offers with minimal documentation. This offer is available on a myriad of products including credit cards, personal and business loans, etc. You can check your pre-approved offer by entering your name and contact details.
Apart from these, your credit card statement can also contain additional useful information such as partner rewards points, tax rate changes, and terms of service. So, make sure to stay informed regarding all such entries and contact your financier in case of any discrepancies.
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