I remember getting my first ever credit card in the mail. It was a pre-approved account and all I needed to do was call customer service to have it activated.  Before this, I was bent on not applying for one. However, since it already arrived, I thought why not just activate it and let it sit in my wallet for “emergency” purposes? Anyway, the annual fee was waived and the limit was relatively low. It was that tempting and that actually started this nightmare called debt.

Yes, I was excited. I was blinded by the fact that I gained a bit more purchasing power, although something I did not earn. It would have helped if I tried to understand the first credit card statement, or even the succeeding ones. I learned everything the hard way – I should have known the signs and read the fine print. That would have helped me prevent overspending and become a bit more educated in using cards.

Here are a few things that I learned when I finally decided to study my bill. These might help you, too. Checking out the front of a credit card statement, you will find your Annual Percentage Rate (APR), minimum payment due, new balance, finance charges, grace period and other credit card fees. The APR measures how much your debt is costing you and is expressed by amount of interest that you would pay yearly. A lower APR is better because it only shows that the way one manages credit cards is better than most people. The minimum payment due is the least amount your credit card company expects to receive from you monthly. There is a formula that is followed, and varies from one company to the other.

If you only pay minimum each month, you are likely to extend debts for a longer period of time, thus, increasing the interest that banks charge you. It is also a bad idea to skip paying the minimum altogether because you will be putting your financial health at risk. New balance is what you still owe. Finance charges are interest costs incurred and are applied to balances. To minimize on this, try to keep balance at low. Grace period is a privilege only given to those who have diligently paid last month’s due in full. Credit card fees vary depending on card type. You may be charged for the annual, late, over limit and returned check fees.

The ones noted above are just the front of the statement. Better study the back portion as well. Remember, understanding credit card bills will ultimately help you become a responsible card holder.

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