Fine print, Protecting yourself

As rates rise, take a fresh look at your credit card statement

Fred Williams
Credit card statements

Interest rates on credit cards are going up, making this a great time to get reacquainted with the monthly account statement.

If you’re like many people – even some of my co-workers at – you haven’t looked at the actual statement in a while, maybe years. Our poll in June found that 54 percent of American consumers still received bank and card statements on paper, leaving 46 percent who do not. Among younger consumers ages 18 to 25, just 6 percent received their card statements on paper.

Certainly it’s convenient to check the transaction summary online or on your phone. If the charges look kosher, you’re all set. Maybe just peek at the rewards total before paying the balance, or a portion of it. It’s quick, and no trees are harmed.

But the main screen that you see online, or on a mobile app, isn’t the real deal. The welcome screen may show a transaction summary and how much you owe. But rarely is the online summary also the official statement, with its legally required disclosures of interest rates, balances and other information.

The “periodic statement,” as it’s defined in the Truth in Lending Act, must tell you all sorts of things – by law – that online transaction summaries are free to ignore. For example:

  • Annual percentage rates must be spelled out on the periodic statement. Do you know your rate? Before you answer, remember that the Federal Reserve just boosted short-term rates by a quarter point Dec. 14, causing banks’ prime rate to rise by the same amount. As a result, almost all bank-issued cards are raising their APRs by a quarter point.
  • Balance breakdown. The periodic statement must show how much you’re being charged in interest, and how that total was calculated. If there are different rates for different balances, those balances must be listed separately. Purchases are just one way of building up a balance. Many accounts have a cash-advance balance or a transfer balance, among others. The online summary is free to lump those amounts together, but they should be managed separately.
  • Minimum payment warning. How long will it take to pay off the balance making only the minimum payment? And what will that cost? Card issuers are required to include this calculation prominently on the monthly statement.

These disclosures and others were built into credit card laws over decades, in order to protect card users. But the laws were written with the assumption that everyone received and checked the statement in order to pay the bill.Interest charge calculation

Now, it is up to card users to find the information in the statement and make use of it. It’s not necessary to go back to receiving paper statements by mail, if you don’t already. The periodic statement also is online – often under an inconspicuous text link. (See “How to read, understand your card statement.”)

My main card gathers the periodic statements under a dull-sounding section called “statements and documents,” which is a few clicks away from the welcome screen. That’s where I find out that my APR is 18.15 percent on purchases – and 25.15 percent on cash advances. The statement also informs me that it will take 13 years to pay off my $2,500 balance if I make only minimum payments. That will cost about $3,000 in interest.Minimum payment warning

For people who manage card accounts online, this is a good time to look up the periodic statements. Before its Dec. 14 hike, the Fed raised rates just once in 10 years. Now it predicts three hikes in 2017.

“With rates picking up slowly, this is the time for people to go back to their budget, go back to their credit report and get their budget in tune,” said Martin Lynch, director of education and compliance management at Cambridge Credit Counseling in Massachusetts. Part of a budget tuneup is knowing the cost of having credit card debt.

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