A statement credit is money credited to your account that is deducted from your card balance. You can get typically get one when you return purchased goods, file and win a chargeback, or sign up for rewards cards.
Have you ever wondered what those green negative numbers on your credit card statement are? If you’re a credit card holder, odds are you’ve run into them more than once. They’re statement credits, and they can show up for a number of reasons.
If you find statement credits confusing, you’re not alone. Many credit cardholders have questions about them. Here’s what you need to know about what statement credits are, how you get them and how to use them.
What is a statement credit?
A statement credit is like a refund you receive from a credit card company or a merchant. It’s money credited to your account that is deducted from your balance and therefore appears on your statement as a negative number. It essentially reduces the amount of money you owe.
In some ways, a statement credit is similar to paying a part of your credit card balance. The difference is that instead of you depositing your money, the credit card issuer or bank reduces your debt.
It’s important to note that, even though statement credits lower your balance since you’re not putting any money into your account, they don’t count toward your minimum payment. This means that, even if you “pay” most of your balance with a statement credit, you’ll still have to make at least the minimum payment on the outstanding balance every month.
How to earn statement credits
There are a few ways to get statement credits:
Typical statement credits come from refunds for returned purchases. If you bought something with your credit card and then returned it, the merchant issues the refund in the form of a statement credit, which should appear on your statement within a few days of returning the item.
Credit card signup bonuses
Many credit card issuers offer statement credits as incentives for signing up for a new credit card. In some cases, these statement credits can be used only toward a specific purchase category like travel or dining, while you can use others to cover any purchase.
One example is the Blue Cash Preferred® Card from American Express, which earns you a $250 statement credit if you charge $3,000 or more within the first six months. That statement credit is then applied to the next $250 in purchases you charge to your card after receiving the bonus.
Credit card rewards
Many rewards credit cards will let you redeem your points, miles or cash back rewards as statement credits toward different purchases. Different rewards programs handle these redemptions differently. Here’s how some of the major rewards programs treat statement credits:
|Rewards program||Can you redeem rewards as a statement credit?||Minimum redemption||Rewards rate when redeemed as a credit|
|Discover cards Cashback Bonus||Yes||None||1:1|
|Bank of America Cash Rewards||Yes||None ($25 for automatic redemptions)||1:1|
|American Express Membership Rewards||Yes||$25||1:0.6|
|Chase Ultimate Rewards||Yes||None||1:1|
Special credit card perks
Besides rewards for purchases, some high-end credit cards also offer valuable perks, including special recurring statement credits. For example, the United Explorer Card and Chase Sapphire Reserve card offer up to a $100 statement credit to cover the cost of a Global Entry or TSA PreCheck application.
Chargebacks are disputes you can file when a merchant refuses to give you a refund even if the product or service doesn’t meet your expectations or you never received the product in the first place. People also file chargebacks when they notice a purchase they don’t recognize on their statement. If you’re successful in getting a chargeback approved, your credit card issuer will give you a statement credit for the amount of the disputed purchase.
How to use a statement credit
Using your statement credits depends on how you earn them. In most cases, you don’t really have to do anything — they’ll just show up on your credit card statement every month. This is the case when you return an item, for example, or make an eligible purchase with a credit card that offers cash back rewards as statement credits. This is also the case with most sign-up bonuses, especially those applicable to all purchases.
On the other hand, special cash back programs that partner with specific brands like Uber sometimes require you to enroll in the particular offer, but once you do, credits will usually be posted to your statement automatically.
Redeeming points for statement credits
The main instance in which you’ll need to take action to receive a statement credit is when redeeming rewards for points, miles or cash back. This is because if your rewards card offers them you need to choose that option, as opposed to the other redemption possibilities. To redeem rewards for a statement credit, you usually have to log into your online credit card account, select an eligible purchase and then choose to apply your rewards as a statement credit.
While a statement credit can be a great way to use your points to reduce your balance, there are some things to consider first.
The main question you should ask yourself is, “Are my points or miles worth at least 1 cent each?” If the answer is no, then you may get more value out of your points if you redeem them for travel — especially if you’re able to transfer your points to an airline or hotel loyalty program. In some cases, your points can be worth more than 2 cents a piece by moving them to the loyalty program of a travel provider that partners with your credit card issuer.
On the flip side, redeeming points for a statement credit can be worth less than 1 cent, as is the case with American Express Membership Rewards.
Other things you should consider before redeeming rewards for a statement credit include the amount of points or miles you have, the size of your balance and your lifestyle. For instance, do you like to travel or do you spend a lot of time at home? If you spend more time at home, then paying off part of your balance with a statement credit may be a better option.
Statement credits are a great way to get money back from your credit card company for different purchases, charges and even disputes. You can expect them to show up on your statement, but there are a few cases in which you may need to take some extra steps, such as redeeming rewards points for statement credits.
Statement credits offer convenience in exchange for a lesser value per point or mile redeemed, however, making them a bad choice if you want to maximize your points’ value. In the case of special credit card perks and sign-up bonuses, however, statement credits are as valuable as having hard cash deposited in your account. All in all, statement credits are a great way to get some extra value out of your credit card.