What to look out for in your Credit Card statements
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09 DECEMBER, 2019
As a credit card customer, do you jump straight to the total amount due and the due date in your credit card statement?
In the process, you could be overlooking important information about what your credit card has to offer during that billing cycle. This, in turn, might lead to inefficient use of the card and prove costly in the long run. Also, skipping through these details may lead you to miss out on checking for any incorrect payments.
To utilize your credit card efficiently, take a look at these critical data points you should be aware of:
Credit limit
This is the maximum amount the card issuer allows you to borrow. This limit is based on your income profile and your payment track record. A good payment track record will help you raise your credit limit and vice versa, at regular intervals.
Available Credit Limit
This is the difference between your credit limit and the amount you have spent (total amount due). So, if you have spent ₹30,000 and your credit limit is ₹80,000, then your available credit limit will be ₹50,000.
Payment Due Date
This is the date by which your due amount should be paid, i.e., the card issuer should realise the amount on or before this date. Issuing the payment cheque before the due date is not good enough if the amount is not credited to your credit card account by the payment due date.
Paying your credit card bill before the due date is the key to managing your credit card history and your credit score.
Cash Limit
Credit card issuers also allow you to withdraw cash from the ATM. There is a separate limit called the cash limit available on your credit card. This amount varies from bank to bank and will incur a one-time transaction fee. In addition, interest charges (generally higher than normal rates) start accruing immediately.
So, this facility is best used in case of emergencies.
Total Amount Due
This is the total outstanding amount on your credit card, i.e., the amount you owe to the credit card company. This is a cumulative amount comprising of the interest and all other charges.
Minimum Amount Due (MAD)
The card issuer fixes a minimum amount that you need to pay every month. This is usually a percentage of the total amount due. Non-payment of MAD is treated as default and a late payment fee is levied. If you opt to pay the minimum amount due, the unpaid amount is carried forward to the next billing cycle. For any fresh purchase, you start paying interest from the day the purchase is made. Also, even if you pay MAD, interest is charged on the total amount due which will include MAD as well. So, if you have paid 60% of the total due before the due date, interest will be charged on 100% of the total amount due rather than on the 40% balance.
So, the next time you receive your credit card bill, take the time to read it carefully. Not only will it protect you from overpaying but it will also help you manage your cash flow better.
Read more about ways to keep track of your money while using a credit card here.
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