WHAT IS A STATEMENT CREDIT?

You may be able to redeem your rewards for a statement credit if you have a rewards credit card. You could even receive credits automatically at times. The card issuer simply adds money to your account balance with a statement credit rather than depositing funds into your bank account or sending you a check. Depending on the card and credit, there are ways to increase the value of your statement credits.

But first what are statement credit cards?

You'll find this and some more deets about statement credit cards in this article.

WHAT IS A STATEMENT CREDIT?

Statement credit is similar to a discount. It's a perk for doing something. It is a credit that your card issuer will apply to your account balance in order to reimburse you for all or part of a purchase — whether it's a specific purchase they want you to make, a certain amount of money they want you to spend on your card or a combination of the two.

Statement credits equal savings on purchases that you would have made anyway. They are an important tool for banks to use in order to retain customers. It's not just a feature available on cash-back credit cards. Statement credits, while not always the best value, are a simple way to cover purchases with points.

HOW DOES STATEMENT CREDIT WORK?

Statement credits appear on your statement as a transaction with a negative amount. They could be based on receiving credit for a returned item or on a cash rewards program provided by the credit card company.

Credits will reduce the total amount owed towards your card balance. However, the credit amount will not be deducted from any required minimum payment. However, once the credit is received, it will reduce any interest or fees based on your outstanding balance. Statement credits are frequently generated as a result of various credit card rebate and cash-back programs.

Cash-back rewards are typically a percentage of your purchases made with the card. Cash may be earned on a flat-rate basis, implying that all purchases will receive the same level of rebate. Alternatively, the rebate may be limited to specific purchases, such as those made at a grocery store. Furthermore, the credit card company may offer a lower rebate for all purchases and a higher rebate for a specific category of purchases. The category with the highest level of reward will frequently change over time.

HOW DO YOU RECEIVE A STATEMENT CREDIT?

1. Returns

When you return a previous purchase, whether online or in person, the money is usually credited to the credit or debit card you used to make the original purchase. When this occurs, the refunded amount is applied to your card account balance as a statement credit.

2. Travel Reward Redemption

Credit card companies offer travel rewards in various ways, one of which is by allowing redemption for previous purchases. There are several credit cards that provide statement credits for travel purchases. Here are some examples of statement credits you might come across:

Travel credits: These are some of the most effective travel credits because they are frequently valid for a wide range of travel purchases such as flights, hotels, car rentals, and more.

Airline credits: You will be reimbursed for eligible airline spendings, such as checked baggage fees and in-flight purchases.

Dining credits: When you use your card at restaurants, food delivery apps, and other locations, you will be reimbursed.

3. Cash back rewards

Many credit cards offer cash back, and one way to redeem your rewards is through a statement credit. If you redeem in this manner, the redemption amount should be credited to your account as a statement credit, reducing your card balance.

However, keep in mind that not all credit cards provide the same methods for receiving or redeeming cash back. Some may allow you to choose between statement credits, checks, and deposits into a bank account, while others may limit your options to just one.

HOW TO USE A STATEMENT CREDIT

When statement credits are part of your card's benefits, there are usually no extra steps required to use them. You may be required to enroll in an offer but a credit will appear on your account automatically after you make an eligible purchase.

If you want to redeem your rewards as a statement credit, you must do so through your online account. However, while cash back for a statement credit is a good deal, redeeming points or miles for it is usually not the best option. When you do this, your travel rewards may lose a significant amount of value.

BOTTOM LINE

Statement credits are an excellent way to obtain reimbursement from your credit card company for various purchases, charges, and disputes. You can expect them to appear on your statement, but in some cases, such as redeeming rewards points for statement credits, you may need to take additional steps.

Statement credits provide convenience in exchange for a lower value per point or mile redeemed, making them a poor choice if you want to maximize the value of your points. However, they are as valuable as having hard cash deposited in your account when it comes to special credit card perks and sign-up bonuses. Overall, statement credits are a great way to get some extra value out of your purchases.