Being Wrongly Charged on Your Credit Card? Read This

Getting a credit card statement is a monthly ritual if you have a credit card. Many cardholders choose to ignore these statements assuming that a text message from the bank about the amount to be paid is sufficient information. However, just being unaware of the gravity of information in the credit statements can sometimes be perilous and may land in deep financial trouble in case of some tampering with your account.

You may be ignoring some wrong charges inadvertently levied by your bank or the change in address, which can be the first step in case of an identity theft. It is always better to read through your credit card statement.

Here is how you should read one:

Check the credit card number and other demographic information - your address, email id, phone number. If there are any mistakes, notify the lender to rectify it.

Then you come across credit-related information. Remember: Credit limit and available credit limit are two different things. While the former talks about the maximum amount your lender will let you borrow, the latter indicates how much more you can spend, i.e. the difference between the credit limit and the amount of money you have already spent. Your income profile decides how much credit limit is offered to you. As you establish a good repayment record and your income rises, bankers are comfortable offering you more credit. If you spend less on your credit card, you have the cushion of high available credit limit that comes handy in times of emergency needs.

Banks also mention separately about cash advance limit. This is a sub-limit in the credit limit. This is the money you can withdraw from a teller machine using your credit card. However, cash withdrawals on credit cards come with a steep one-time charge, which can be in the range of 2.5 to 3 per cent. The interest on this too accrues immediately. So, it is better use this facility only in extreme situations.

Then come two important dates. First is the statement date, which is the date on which your credit card statement is generated each month. Second is the due date, which is the date you pay a payment to the bank. Please note that you need to pay in such a manner that your bank reaises the money by the due date. If you are paying by cheque, it is better to pay at least three days before the due date, so that the money is realised by the bank before due date.

Other important components in a credit card statement are the minimum amount due and total amount due. Total amount due is the money you have spent on your credit card. Minimum amount due is a percentage of total amount due - say 5 per cent - that the bank expects you to pay before the due date. If you choose to pay the minimum amount due, you are opting for credit offered at a very high rate of interest - 36 to 42 per cent per year. The bank charges you this rate of interest on the unpaid amount. Your available credit limit for the next month accordingly goes down.

Your all subsequent purchases are charged interest from the date of purchase. In simple words, you start paying more than what you actually spend. If you fail to pay even the minimum amount due before the due date, your lender will treat it as a default and levy late payment charges as well. So, always pay the total amount due before due date. This will also help you keep your CIBIL score in check.

It is always better to run through the list of transactions that follow these vital statistics. If you come across any discrepancy, it is better to inform the bank. If you are using a cash back credit card, do check if all eligible transactions for the cash back are recorded in the statement. Also check reward points accrued to you.

Some banks also notify important messages such as changes in charges, interest rates and new rules at the bottom of the credit card statement.

By following these simple instructions, you can prevent any misrepresentation of facts or tampering with your account.

Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.