Credit Card And Statement Explained

A credit card is a piece of plastic about 3.5 x 2 inches in size. Some of the features of credit cards are:

• Logos: The credit card carries logos of the card association (Visa, MasterCard) as well as that of the card issuing bank (ICICI, HDFC and so on) in the front.

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• Number: The credit card number is embossed in the front. This is usually a 16-digit number. The first digit symbolises the major industry. Banking industry cards usually start with 4, 5 or 6. The first six digits of the credit card number identify the card issuing bank. The next nine digits denote the individual’s account number. The last digit is a check digit.

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• Name: Also embossed on the front of the credit card is the name of the card holder.

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• Expiry date: The date till which the credit card is valid is embossed on the front of the card.

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• Magnetic stripe: There is a magnetic stripe (called magstripe) running through the length of the credit card on its reverse. This contains the identification information of the credit card which is transmitted during a transaction.

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• CVV No.: This is a three-digit number that appears on the reverse of the credit card after the 16-digit card number. This is used as an additional security check, mostly in online transactions.

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• Signature: There is a space below the magnetic stripe where the card holder is supposed to sign. While processing a transaction, the merchant has to verify this signature on the credit card.

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• Contact Nos.: On the reverse of the credit card, the card issuing bank’s contact numbers are printed. The card holder can call these numbers for any credit cardrelated queries.

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Ok, now you used your credit card all month long and have received a statement from the bank. You are unable to understand some terms on the credit card statement. This often happens to first-time card users. Reading a credit card statement involves looking at a lot of figures. But as long as a card holder is able to understand the various details then using this information becomes a very easy task. Here are some of the factors that you need to watch out for:

• Statement date: This is the date on which the credit card statement is generated. The statement is usually generated once a month on the same date, so this date also gives an idea to the card holder about when the next statement will be generated. All the credit card expenses that are presented to the card issuing bank by the statement date will be included in that month’s statement.

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• Due date: This is the date by which the payment has to be made to the card issuing bank. Just like a statement date there will be a due date for each month’s credit card statement, but there is a slight difference here. The due date might vary by a day or two each month depending upon the actual position of the days. For example, the due date might be 15th of a month but in one month this could be 17th because of two holidays that fall in between, and so on.

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• Late payment fees: These are the fees that are levied in case you do not pay your bill on time. This often happens when people actually pay the entire amount outstanding but miss the due date by a day or two. The late payment fee is generally a fixed amount that can range from Rs 300-Rs 500 and has to be paid irrespective of the amount of the bill paid late. Often one can end up paying a larger late payment fee as compared to the bill amount.

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• Interest charges: This charge is paid by credit card holders because they have decided to roll over the amount to be paid. This figure is present in the form of an entry and different banks show it differently, so it is very important that various terminologies or codes used on the credit card are understood properly. If the exact working is required then the card holder will have to apply the rate for the number of days and the amount outstanding.

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• Service tax: This is the amount charged by the government as service tax on the earnings of the credit card issuing bank. Every interest or other charge and fees that the bank levies on the customer will have a service tax. This will be shown as a breakup into different items as a basic service tax rate and cess on the above figure.

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• Cash limit: Apart from the credit limit there is cash limit mentioned on the card. This represents the figure that the card holder can withdraw from an ATM in cash. This is a certain percentage of the overall credit limit, usually between 20%-30% and it shows the extent of cash that can be accessed by the person.

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• Minimum amount due: Minimum amount you need to pay the bank to avoid being considered a defaulter and attracting late payment fees. The minimum amount due generally ranges from 5% to 20% of the total amount due.

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• Joining fees: Charges levied in the first credit card statement. Many banks nowadays waive these charges at least on entry-level credit cards.

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• Annual fees: Fees levied annually as service charges on credit cards and are generally higher for premium cards. Nowadays, these charges are waived on entry-level credit cards.

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• Cash withdrawal fees: Fees charged if you use your credit card to withdraw cash from an ATM.

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• Overlimit charges: Charges made in case you exceed your credit limit.

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• Reward points : Most credit cards give you reward points on the basis of transactions made. The statement reflects the reward points you have earned.