Saturday, October 1

Why credit cards statement are important?

Credit cards have changed spending habits forever. Individuals are learning money management techniques to utilise credit cards with utmost care. One should be good at planning the finances while using credit cards. Ignorance can result in hefty costs. Therefore, a credit card statement is an important document for individuals. 

What is a Credit Card Statement?

A credit card statement is a billing document. It is issued by the credit card issuers to the credit holder on a monthly basis. Consumers can get all the information about their credit cards. It contains payment history, interest calculation, cash and credit limit, due amount, etc. It helps credit card users to track their purchases or expenditures. In these monthly statements, you can get the data on each transaction made on your credit card during the billing cycle. You can keep a check on this statement to prevent any activity from impacting your credit score negatively.

What is the Importance of a Credit Card Statement?

The importance of credit card statements for consumers is beyond checking transaction records. Let us explore the importance of the credit cards statements in detail. 

  • Transparency: A credit card contains every detail about your transactions made on your credit card during a billing cycle. You can check every important aspect in a credit card statement that you need to know as a cardholder, like interest rates on cash advances and purchases. 
  • Avoid Penalties and Interest Spikes

It is necessary to pay your credit card bill on or before the mentioned date in the statement to avoid late fees and interest amounts. Your credit card statement reminds you of the due date. Generally, credit card statements are issued on a monthly basis on specific dates, but it’s not a calendar month. If your payment date changes, you should know about it so that you can maintain the required funds in your account to pay the bill and avoid late payment penalty fees. 

  • Spot Unwanted Transactions for Better Budgeting: Using your credit card responsibly, you can actually support your financial plan. Consumers can track their purchases and expenditures from their credit card statements. You should keep track of credit card transactions and know where you swipe your card unnecessary and how much you are spending. Most banks categorise your expenses into different groups. You can use it in your budget worksheet and compare your inflows and outflows and take an honest look at your expenses. Check essential and nonessential expenses and control where you can to meet your budgeting goals. 
  • Spot Billing Errors

Mistakes happen, and credit card statements are not exceptions. If an individual spots an error in the statement, such as a dual transaction for the same purchase, it’s easy to get a refund. You should register a timely complaint for any false transaction or error in any amount or due amount to resolve the issue and get a refund. If you ignore your statements, you won’t see that money again.

  • Reward Updates 

Your credit card statement helps you to stay updated about your earned rewards also. There can be special offers to redeem those rewards at many merchant outlets.

  • Credit Limit Alerts

Banks decide a credit limit on your card on the basis of your credit score.  This card statement also reminds you of the remaining credit limit. It will help you to plan your future expenses on your credit card. If you exceed your credit limit, the bank can charge a fee.

  • Tax Benefits 

If you are a cautious spender, it is a good idea to use your credit to make most small and big expenses, especially for business and charity. It helps you to save on taxes. Your credit card statement will be the supporting document for tax benefits while you file taxes.

Thus, your credit card statement can help you to use your credit cards responsibly. Read and understand the terms on the statement carefully. Spending only a few minutes each month on your credit card statement analysis can help you to keep control of your finances and stay away from racked debts.

Best practices to manage your credit card debts include:

  • Keep your credit utilisation ratio below 30%. 
  • Keep the limited number of credit cards – maximum 2 or 3. 
  • And, of course, monitor your credit statements regularly.