Credit card statements: How to read and understand them

Your monthly credit card bill got a makeover in 2009 thanks to lawmakers and federal banking regulators.

The monthly statement makeover is part of a much larger series of credit card regulation reforms approved by the Federal Reserve Board in December 2008.

Whether you get your credit card statements in the mail or online, the documents have taken on a new look since the Credit Card Act of 2009 took effect.

The Act was implemented in three phases, with the first phase (which went into effect August 2009) requiring card issuers to provide customers a 45-day notice period before implementing any changes to the card’s terms.

And new design and disclosure requirements mandated by the Credit Card Act took effect in February 2010.

The third phase, which involved an amendment to Regulation Z of the Truth in Lending Act, became effective in August 2010 and addressed unreasonable penalty and late payment fees.

Statements are now more user-friendly.

Statement designs have become more reader-friendly since then to help credit cardholders easily find important information on their monthly statements — namely, when payments are due, the amount owed, the consequences of making late payments and how much they are paying in fees and interest on different types of accounts.

Another feature warns consumers about the cost of making only minimum payments each month.

Each credit card bill also has a box that states how long (in months or years) it will take to pay off the entire balance if the cardholder makes the minimum payment compared to how long it might take to pay it off when making higher payments.

The box also states the total dollar amount cardholders would pay when both interest and principal is factored in — and this information has certainly been eye-opening for some borrowers.

The previous standard for credit card disclosure was the Schumer Box, which required key terms to be listed in a table and included in credit card offers, applications and monthly statements.

The current standard is like the Schumer Box on steroids, with much more details about terms and what they mean — and more tables.

See related: What’s the difference between statement balance and current balance?

Consumer feedback influenced implementation

The Fed conducted consumer tests of credit card statements to determine what worked best when providing key information.

Users complained that wording on the old statements was confusing, the type was too small and key information was missing.

Testers said they liked information presented in boxes that they could clearly read.

Capital One had also conducted consumer tests before redesigning its statements.

“We wanted to maintain some consistency with statement usability to ensure our customers didn’t get lost in the new statement,” said Pam Girardo, former spokeswoman for Capital One.

“We showed a variety of statement designs to understand what resonated and what didn’t and to make sure consumers understood the information.”

Here’s an explanation of some of the updated statements’ features, based on the Federal Reserve Board’s samples.

Your statement may not look exactly like this because each credit card issuer uses its own.

Source: creditcards.com