Understanding Your Credit Card Statement Balance

Credit Card Statements are Logically Organized

Like a lot of financial paperwork credit card statements seem to come at you with a lot of information, but if you know how to read them then you’ll find that they have lots of useful information organized in a logical way.

Credit Card Statement Balance Summary

Your credit card statement will have a summary of your account’s activity for the past month. Following is an example of how it’s organized along with an example of what each line item means.

Description	Amount	Explanation
Previous Balance (or Beginning Balance)	$1,880	This is the ending amount from your prior credit card statement that carries over to the current month. In other words, it should be equal to the “New Balance” on your lastcredit card statement.[1]
Less: Payments and Credits	($225)	This is the amount you paid on your credit card the prior month. It can also have miscellaneous credits such as refunds from store returns.
Add: Current Charges	$375	This is the total amount of your credit card purchases during the past month (which ties to the “Summary of Current Credit Card Charges” below).
Add: Finance Charges	$20	This is the current month’s interest that you owe on your outstanding credit card balance.
Add: Fees and Penalties	$10	This is where charges will show up for things such as annual fees, late payment fees, penalties for exceeding your credit limit, etc. If you don’t understand why you were charged this amount then contact your credit card issuer.
Equals: New Balance (or Ending Balance)	$1,060	This is the sum of your outstanding balance from the previous month ($1,880), less payments you made ($225), plus interest and fees ($20 and $10), plus amounts charged for the month ($375). The total ($1,060) represents the amount you would need to pay in the current month to settle your credit card balance in full (though you can pay less than that all the way down to the minimum payment which is described below).

Summary of Current Credit Card Charges

In addition to summarizing the activity in your account, your credit state statement will provides details for all of the charges that you made in the past month. Examples of such charges are as follows.

Description	Amount	Explanation
Crash and Bash Auto	$245	This was a one-time charge to cover a car repair.
See-it-Again Movie Rentals	$20	This is a recurring monthly charge for a subscription-based movie rental service.
Forgotten Fine Dining	$55	You charged this amount at a restaurant, but you’d forgotten about it until you got your credit card statement.
Phantom Industries Nonrecurring Charge	$40	This is a charge that you don’t recognize. You should search your records to determine what it is and, if you can’t figure it out, you should call the company (their number or website should be on the credit card statement).
Nasty Surprises Incorporated	$15	This is a charge from a company you recognize and have dealt with in the past, but for reasons you don’t understand they’ve charged you unexpectedly. You should call the company to find out why.
Equals: Total Charges for the Month	$375	This is the sum of the above amounts, and it ties to the “Current Charges” line on the “Credit Card Statement Summary” above.

Rewards Summary

If you have a rewards credit card where you accumulate points, flight miles, or other incentives then you should see a summary of your rewards activity on your statement organized something like this:

The minimum payment and the due date

Your credit card will always show you your minimum payment, or the lowest payment the credit card issuer will accept by the due date without penalizing you according to the terms of your credit agreement. Depending on terms of your credit agreement you can expect your minimum payment to be between 1% and 4% of your current balance. So based on the figures in the example above if your minimum payment percentage was 3% then you would have to pay at least $32 by the due date in order to avoid late payment penalties ($1,060 x 3% rounded up to the nearest dollar). Again, you can always pay more than the minimum payment, but you have to pay at least that much.

3 Key Things to Look for When Examining Your Credit Card Statement

Now that you understand the fundamental of reading your credit card statement I want to reemphasize 3 points that I alluded to above.

You should recognize all vendor charges – Nobody should charge your credit card unless you give them express permission to do so. Thus if you see a charge from a company you don’t recognize, you should follow up to see if it’s legitimate.
Vendor charges should be accurate – Once you’re sure that nobody unexpectedly charged your credit card, you should then make sure that you were billed the right amount for each transaction. If not then you should find the paperwork for the applicable charge(s) and contact the company directly to resolve the problem (their phone number and/or website should be on your credit card statement or the receipt from the transaction).
Your credit card company’s charges should be correct – You should understand both the rationale and amount behind all credit card interest, fees and charges. If you see anything that look unusual, inappropriate, inaccurate or excessive then don’t hesitate to contact your credit card issuer to get some answers.

[1] To further illustrate, if $1,880 was the “New Balance” or “Ending Balance” on your November credit card statement it should also be the “Previous Balance” or “Beginning Balance” on your December credit card statement.