If there was a contest for cramming information onto a sheet of paper, credit card companies would win the grand prize, hands-down. A typical credit card statement is loaded with information that consumers barely look at. It's in their best interests, however, to understand what all that data means.

Credit card statements are a perfect example of a financial tool that's too simple for an accountant to handle, but too difficult for many consumers to understand. The statement can be overwhelming with all its information on charges, credits, and APRs. However, if you understand how to read a typical statement, you can extract the financial information that you need to accurately track your personal finances.

The following information is on your credit card statement:

Purchases and New Charges

The "Purchases/new charges" section has an itemized listing of all the charges you've made. To ensure that these are accurate, keep your receipts every month, and compare them to what's on the statement. Many personal finance software programs allow you to track this on your home computer, and then easily reconcile your charges at the end of the month.

Double-check to make sure that the appropriate interest rates are being levied to the correct charge. If you've made a zero-percent balance transfer, for example, you'll want to make sure that you're not being charged a different rate for that balance.

Payments and credits

In the "Payments and credits" section, you'll find details regarding any previous payments that you've made, as well as credit that you've received for returning merchandise. Just like you checked to make sure that the correct interest rates were being charged on your purchases, you should also be sure that your previous month's payments were applied in the correct area. If you specify that a portion of your payment be applied to your cash advance balance, make sure that the credit card company allocates it correctly.

Finance charges, APR, and Previous balance

The above three items will also be listed on your statement. The finance charge will be an indication of the amount of money that you'll be charged if you don't pay your balance in full. The APR stands for annual percentage rate: It can fluctuate, but it really shouldn't vary too widely each month. And your previous balance should line up with your bill from last month, as well.

There are a variety of other items listed throughout your credit card statement, such as "cash advances," "payment due date," and information on your grace period. If you don't understand any of these details, or if you have any questions regarding what you believe are discrepancies on your statement, contact your credit card company right away. They should take the time to explain the finer points of your statement.

Once you understand all the jargon, the credit card statement won't be such a mystery to you. You can then move on to the bigger puzzle-how to keep those monthly charges under control.

Published on November 7, 2007