No matter where you shop for presents this holiday season, one question will remain after the holidays: When was the last time you spent some quality time with your credit card statement?
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With paperless billing and automatic payments, many people don’t bother to review their monthly charges and overlook any hidden messages on a statement. If you’re among the guilty of blindly paying your monthly credit card bills, here are some things you could be missing:
The “reality check” box. Somewhere on a statement is a section that discloses how long it will take you to pay off your debt if you are just making minimum payments. You might be surprised to learn that just paying the required amount could take years, even decades to become debt free. This projection could motivate you to come up with a smarter pay-down strategy. Try a payment calculator online to see how different payment amounts can shorten your road to a debt-free life.
What you bought. Think your coffee habit or grabbing food on the go isn’t that bad? Looking at your purchases line by line can clue you in to your spending personality. You might want to blame a couple bigger charges like car repairs for a high balance, but most of the time it’s small, daily expenditures that add up to the hefty total. If you’re looking to trim your budget, analyzing where your money is going is a good first step to reining in your spending. Highlight all discretionary items and add up their total costs to show how much money you can be saving a month.
A charge that makes you go “hmmm.” If you spot a charge that you can’t quite place, don’t dismiss it as something you probably just forgot about. Some merchants do appear on your statement under parent company names so they may look unfamiliar—but still check it out. There’s often a contact number listed next to each billed item, or you can call the credit card issuer to find out when and where the transaction took place. If the purchase still seems wrong, you may want to report a possible fraud on your account.
Available credit. If you have a $5,000 credit limit, but only have $150 in available credit, that means you owe a balance of $4,850 and are hovering dangerously close to your limit, bad news for your credit score. You should strive to pay off your balance in full each month, or at least carry a balance that’s 30% or less of your total credit limit. Maxing out an account sends up a huge red flag that you’re at risk for not being able to handle your debt and that could hurt your credit score and future spending power.
Points/rewards balance. Some people use their credit cardsand don’t even realize that they are entitled to rewards and special perks. If you've never cashed in your credit card points (or even know that you have them), you might be surprised at what you can earn. Take a look at your statement to see if there’s any mention of points, rewards, or miles, and call or go online to your bank’s website to see how you can redeem them. Some cards allow you to choose from a catalogue of products, gift cards to your favorite retailers, or simply request a check or statement credit for points earned.
Michael Germanovsky is a personal finance expert with in-depth knowledge of credit cards, charge cards, and pre-paid cards. His tenure as a personal finance expert began at the Novoye Russkoye Slovo, a partner of the New York Times International Weekly. In 2011, Germanovsky created the Student Credit Card Education Initiative and sounded awareness of high interest rates. At large, Michael is editor-in-chief at Credit-Land.com.