A credit card statement credit is a payment issued by a business and posted to your credit card account. Such payment shows up on your monthly statement as a credit. It can then offset expenses in your credit-card billing statement.

Most Common Reasons that You Receive a Credit

Your credit card company or merchants that have billed your card for purchases are usually the ones issuing statement credits. For instance, typical credits include refunds from merchants, credit card sign-up bonus issued by your card issuer, or credit card rewards that you redeem points or miles for.

When you make a purchase with your credit card and return it afterwards, a store may refund you a credit back to your card. As a result, the credit will effectively erase the previous charge for the purchase. There might also be situations that you get credit for a partial refund. For example, if you shop for auto insurance and switch to a new insurance policy, your current insurance provider will refund you for the remaining portion of unused insurance.

Statement credits by card issuers are also very common. For instance, credit card bonus is frequently in the form of a statement credit. And rewards points or miles that you have accumulated can sometimes be redeemed for statement credits too.

Some cards allow you to apply credits with no restrictions. However, some other cards may only let you apply credits to your account to pay towards purchases in specific spending categories. Common types of category-specific statement credits include credit for travel, grocery, dining, etc. Sometimes you may need to use an online tool of your credit card issuer to choose qualifying purchases to apply your category-specific credits.

Statement Credit vs. Other Forms of Cash Back

When you earn cash back rewards, some credit cards offer the option of redeeming rewards for statement credits. Sometimes you may have alternative options to receive direct deposits to your bank account or physical checks to your address. If you choose to receive a statement credit, the credit can reduce the current credit-card account balance. In the situation that your credit is more than the current balance, the remaining portion of the credit will be carried forward to the next billing cycle.

Is receiving a statement credit better than receiving a physical check? If you have a balance on your credit card, it is more convenient to receive and to redeem for a credit. On the other hand, if you do not have a balance on your card or need cash for other purposes, it might be better to have a check, because it is always more flexible to use the cash for what you want.

Are Statement Credits Taxable?

Statement credits issued by merchants for purchase refunds are definitely not taxable. Statement credits by card issuing banks usually require you to make purchases before obtaining the credits. The credits reduce the account balance and they are similar to rebates. In general, if you have to make a purchase prior to receiving a credit, such credit is equivalent to a rebate on your purchases and rebates are not classified as taxable income.

If the cardholder does not have to spend anything to earn a credit, the credit might be taxable. However, most U.S. credit cards require cardholders to complete qualifying purchases before issuing a credit as a bonus or rewards. Therefore, these are not taxable income. When you have tax questions, it is always best to consult a tax adviser.

A statement credit on a business credit card may not be taxable income by itself, but the credit would reduce the net amount of purchases. Consequently, the net amount to be deducted as business expenses will be lowered and it would make the net taxable income for the business higher, thus creating a net effect of higher taxable income for the business.

Credit Cards that Offer Statement Credits as Bonus or Rewards

A number of credit cards give out statement credits for the sign-up bonus or as a rewards redemption option. Below you will find a few credit cards that let you obtain a bonus in statement credit:

Citi Credit Cards, issued by our partner Citibank

Credit Card		Bonus as a Credit to Account
	Citi Strata Elite℠ Card	75,000 bonus Points after spending $6,000 in the first 3 months of account opening.
	Citi Strata Premier® Card	60,000 bonus ThankYou® Points after spending $4,000 in the first 3 months of account opening, redeemable for $600 in gift cards or travel rewards at thankyou.com.
	Citi Strata℠ Card	20,000 bonus Points after spending $1,000 in the first 3 months of account opening.
	Citi Double Cash® Card	$200 cash back after you spend $1,500 on purchases in the first 6 months of account opening. This bonus offer will be fulfilled as 20,000 ThankYou® Points, which can be redeemed for $200 cash back.

American Express Credit Cards

Credit Card		Bonus as a Credit to Account
	Blue Cash Preferred® Card from American Express	As High As $300 cash back* after you spend $3,000 in purchases on your new Card within the first 6 months of Card Membership.
	Blue Cash Everyday® Card from American Express	As High As $200 cash back* after you spend $2,000 in purchases on your new Card within the first 6 months of Card Membership.
	The American Express Blue Business Cash™ Card	$250 statement credit after you make $3,000 in purchases on your Card in your first 3 months.
	The Blue Business® Plus Credit Card from American Express	15,000 Membership Rewards points after you spend $3,000 in eligible purchases on the Card within your first 3 months of Card Membership.

Chase Credit Cards

Credit Card		Bonus as a Credit to Account
	Chase Sapphire Preferred® Card	75,000 bonus points after you spend $5,000 on purchases in the first 3 months from account opening.
	Chase Sapphire Reserve®	125,000 bonus points after you spend $6,000 on purchases in the first 3 months from account opening.

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Many of you may have observed that the “Minimum Payment” section on your credit card bill is notably lower than the total bill amount. The convenience of owning a credit card lies in the ability to defer payment, akin to a loan, and settle the amount at a later date. However, to avoid penalty fees, a minimum payment must be made every month. This minimum payment represents the smallest amount you are obligated to pay on your credit card statement each month.

Credit card companies are mandated to establish the minimum payment to facilitate the reduction of your balance, assuming no additional charges are added to your balance. It serves as a mechanism to ensure that cardholders make regular payments, albeit at a reduced amount, contributing to the gradual reduction of their outstanding balance.

Minimum Payment Calculation

Each credit card company stipulates its minimum payment calculations in the initial agreement you sign. This can be either a fixed fee or a percentage of your outstanding balance.

If your minimum payment is a percentage of your balance, it typically falls in the range of 1% to 5% on average. In cases where the calculation is based on a flat fee, it encompasses all fees and interest due for that month, along with 1 percent of the principal amount owed. The specific method for calculating the minimum payment is clearly defined in the terms and conditions agreed upon when you initially signed up for your credit card. Understanding these terms is crucial for responsible credit card management and avoiding potential penalties or fees.

Pitfalls

While paying the minimum on occasion may not be inherently harmful, it can become a risky habit. Relying on minimum payments can lead to a growing balance due to the interest accrued on the remaining amount and additional charges added to the subsequent month’s statement. If you continue to accumulate charges without making substantial payments, your balance may escalate, and this is often a pathway to debt.

Dependence on minimum payments becomes problematic when it doesn’t contribute to reducing your overall balance, especially if you keep adding new charges to your account. This cycle is a common factor in individuals falling into debt.

Beyond the financial consequences, failing to pay at least the minimum can result in penalty fees, damage to your credit rating, and in more severe cases, it may prompt the credit card company to take legal action to recover the borrowed funds. Responsible credit management involves understanding the potential pitfalls of relying solely on minimum payments and taking proactive measures to address outstanding balances.

Low Interest Credit Cards

While all credit cards come with a minimum payment requirement, the level of concern varies among different cards. If you find yourself relying too heavily on making the minimum payments, you can consider utilizing 0% introductory APR credit cards strategically. By making the minimum monthly payment on these cards, you can take advantage of the 0% interest offer for the remaining account balance over an extended period, often around 21 months or more.

Once the introductory period concludes, you have the option to explore another 0% interest credit card or opt for a low-interest credit card to mitigate interest costs. This approach can be a helpful strategy for managing debt more effectively, allowing you a temporary reprieve from interest charges and providing an opportunity to address your outstanding balance with a more favorable financial arrangement. However, it’s essential to be mindful of the terms and conditions of each credit card and to use these tools responsibly to avoid falling into a cycle of debt.

Recommendation of 0% Interest Credit Cards

Here are a few top 0% interest credit cards that let you borrow money for at least 12 months.

0% Interest for 21 Months

Credit Card		0% Introductory Interest	Annual Fee
	Citi® Diamond Preferred® Card	0% on purchases for 12 months and on balance transfers for 21 months. After the intro period ends, the go-to rate of 16.49% - 27.24% (variable) applies. (rates & fees)	$0

0% Interest for 18 Months

Credit Card		0% Introductory Interest	Annual Fee
	Citi Double Cash® Card	0% on balance transfers for 18 months. After the intro period ends, the go-to rate of 17.49% - 27.49% (variable) applies. (rates & fees)	$0

0% Interest for 15 Months

Credit Card		0% Introductory Interest	Annual Fee
	Citi Strata℠ Card	0% on purchases and balance transfers for 15 months. After the intro period ends, the go-to rate of 18.49% - 28.49% (variable) applies. (rates & fees)	$0
	Chase Freedom Unlimited®	0% on purchases and balance transfers for 15 months (rates & fees)	$0
	Blue Cash Everyday® Card from American Express	0% on purchases and balance transfers for 15 months. After the intro period ends, the go-to rate of 19.49% - 28.49% variable applies. (rates & fees)	$0

0% Interest for 12 Months

Credit Card		0% Introductory Interest	Annual Fee
	Blue Cash Preferred® Card from American Express	0% on purchases for 12 months. After the intro period ends, the go-to rate of 19.49% - 28.49% variable applies. (rates & fees)	$0 intro annual fee for the first year, then $95.

Small Business Cards with 0% Interest for 12 Months

Credit Card		0% Introductory Interest	Annual Fee
	The American Express Blue Business Cash™ Card	0% on purchases for 12 months from date of account opening. After the intro period ends, the go-to rate of 16.74% - 26.74% variable applies. (rates & fees)	$0
	The Blue Business® Plus Credit Card from American Express	0% on purchases for 12 months from date of account opening. After the intro period ends, the go-to rate of 16.74% - 26.74% variable applies. (rates & fees)	$0

0% APR credit cards are great for allowing cardmembers to hold a balance for a long period without accruing any additional fees. They are safer cards to use if you are worried about falling into debt.

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