Owning and using a credit card is probably the easiest thing anyone can do. But, what comes after? Bills ofcourse!
Understanding how to read your credit card bill is as important as knowing why it’s necessary in the first place. Contrary to popular belief, these convenient plastic cards need not be avoided altogether, however these need to be used with certain amount of caution or rather self-control.
Let us first try to understand how to read a credit card bill.
- Here’s what you will find in your bill:
1) Your credit card number
2) Your account summary
3) Payment due
4) Balance payment
5) Minimum amount due
6) Available credit limit
7) Applicable interest charges
8) Payment Due Date
- Account Summary : also known as the statement date. This gives a list of all the purchases you have made using your credit card in the past one month (your bill is generated on a monthly basis). Also, details about where you’ve swiped your card and how much you’ve swiped it for will be listed.
- Payment due:this column will show how much you have yet to pay on your credit card for the current month.
- Balance payment: it will be previous month’s unpaid amount (if any).
- Minimum amount due: it is the minimum amount payable on every bill you receive. It is usually around three to five percent of the total amount that needs to be paid by you. i.e if you are unable to pay off the total dues, you may pay just the minimum amount that’s due and then the rest will be added to the next month’s bill.
Remember that the moment you do this, you will be charged a particular loan interest rate on the amount that’s due. Also, know that the minimum amount you pay will consist of the interest as well as the principal.
For example, if your total due is 10,000 of which 2000 is from the previous bill, then the interest is charged on the 2000 which was carried over from the previous bill.
- Available credit limit: Total credit limit – used credit limit. It shows how much more you will be allowed to spend through your card. For example, if your total limit is Rs.10,000 and you have spent Rs.4000, then your available credit limit is Rs.6000.
- Interest charges: If you have only paid the minimum amount due, then interest is charged on the remaining amount. Similarly, if you haven’t paid the entire amount then again interest is charged on the due that is carried over from the previous bill.
- Payment due date: It is the date on or before which you will have to pay your bill. If you pay after this date, you will be charged an additional late fee to the existing bill amount.
Now on to the bigger question, why is your credit card bill important?
Well, when you apply for loans be it any type of loan, your credit history will be carefully reviewed. Having a credit card and using it wisely will not only reflect well in your credit history, but also boost your cibil score and improve your chances of getting your loan approved easily.
Another important point to be kept in mind always is that you must never settle your credit card. The moment you do this, not only will your cibil score be lowered to a great extent, but it will also be a major reason for your loan application to be rejected.
Also, every time you read through your bill, and if you are able to understand the terms involved, you should be in a position to judge whether you are being charged according to mentioned policies or not. There have been several incidences where credit card frauds have gone unnoticed simply because the card holder didn’t take the time to go through his or her bill.