Why a card holder should always read credit card statements

Credit card statements are often barely looked at and then thrown away.  This can be a costly mistake.  Credit card statements should always be read and usually stored.

The first reason why credit card statements should be carefully read is to spot fraud.  Although fraud detection systems have become more sophisticated, and card users are more likely to be asked about unusual transactions, the onus is still on the credit card user to spot any fraud that is occurring on their card, and can still be liable for any shortfall.  This means that the credit card statements need to be read as soon as they are received.

Both VISA and MasterCard offer variants of zero liability guarantees.  This means that credit card users will not be charged for unauthorised credit card transactions on two conditions.  The first is that they did not co-operate in the transaction, which as well as not actively setting up the fraud may also mean giving out credit card details to the person who makes the transaction, even if it was intended for a different transaction.  The other condition is that the credit card company is told in a timely manner.

The only way to guarantee that a credit card company is told of an unauthorised transaction is by carefully reading the credit card statement every month.  If the unauthorised transaction is found months later then there will be no certainty that a zero liability guarantee will be honoured and the credit card user will have to rely on less generous government limits, which are usually $50 for unauthorised transactions and can also be affected by timeliness.

Another reason to check credit cards is to check for spending patterns.  Most people do not really know what they spend their money on.  Although budgeting is recommended and will largely sort this issue out, it will not be sufficient on its own, as credit cards can be notoriously easy to use for impulse purchases.  The credit card statement is a very convenient way of checking what has been spent over the month.

Credit card statements should also be retained for a period of time.  It is usually a good idea to retain them for six months if they are used for employment expenses and three years if they could affect a tax return.

Disposal of credit card statements should not be left to chance as they are particularly popular in identity fraud.  Credit card statements should be shredded before being thrown away and care should be taken to erase them from computers before a computer is passed on.