What Is Credit Card Reconciliation?

Credit card reconciliation is a fundamental financial practice that involves comparing and matching credit card transactions with internal financial records. This systematic review aims to ensure the accuracy and completeness of all recorded financial activities. Its primary purpose is to identify any discrepancies, errors, or unauthorized charges that may exist between what the credit card company reports and what an individual or business has documented.

Performing this reconciliation regularly allows for the detection of potential issues, safeguarding financial resources. It provides a clear picture of spending, helping to manage budgets and prevent financial surprises. This process establishes a verifiable link between external financial statements and internal accounting.

Understanding the Components

Before initiating reconciliation, gathering specific documents and records is necessary to provide a comprehensive view of financial activity. A primary document is the credit card statement, typically issued monthly by the credit card provider. This statement details all transactions, payments, fees, and interest accrued during a billing cycle.

Credit card statements commonly include a summary of the previous balance, payments, credits, new purchases, and other charges. They also list cash advances, assessed fees, and total interest charged. A detailed transaction list provides the date, merchant’s name, and amount for each transaction.

Internal transaction records complement the credit card statement, serving as the second source for comparison. These records can take various forms, such as personal expense logs, entries within business accounting software, or physical receipts. For businesses, these internal records are important for substantiating deductible expenses for tax purposes.

These two sets of information—the external credit card statement and internal transaction records—form the basis for reconciliation. The process relies on comparing details from the credit card company’s statement against self-maintained records to ensure consistency and accuracy.

The Reconciliation Process

Once all necessary documents are gathered, the methodical process of reconciliation can begin. The initial step involves reviewing the credit card statement to gain familiarity with its layout and listed transactions. Understanding the statement’s structure helps in efficiently locating specific entries during the comparison phase.

The core of the process involves comparing each transaction listed on the credit card statement against the corresponding entry in internal records. This comparison includes verifying the transaction date, the merchant’s name, and the monetary amount. As each transaction matches, it should be marked off in both the statement and internal records, signifying it has been reconciled.

During this comparison, transactions may appear on one record but not the other. These unmatched transactions, whether present only on the statement or solely in internal records, require identification. They could indicate missing receipts, unrecorded payments, or unacknowledged charges.

A final step involves verifying the beginning and ending balances of the credit card statement against the reconciled internal records. The reconciled internal balance, accounting for all matched and identified unmatched items, should align with the credit card statement’s ending balance. This alignment confirms reconciliation for the billing period.

Addressing Discrepancies

Despite careful record-keeping, discrepancies can emerge during the credit card reconciliation process. Common types include missing transactions from internal records, incorrect amounts, or unauthorized charges. Timing differences, such as a transaction posting to the statement a few days after purchase, can also initially appear as discrepancies.

When a discrepancy is identified, the immediate action involves a thorough investigation. This typically begins with double-checking internal records and cross-referencing them with any available physical or digital receipts. A detailed review of the credit card statement itself can also reveal additional information or clarify transaction details.

If the discrepancy persists after internal review, further steps depend on the nature of the issue. For an unfamiliar charge or an incorrect amount, contact the merchant directly for clarification. If the issue appears to be an unauthorized charge or a billing error, contact the credit card issuer. Consumers generally have 60 days from the date the first statement containing the error was mailed to dispute a billing error.

Once a discrepancy is resolved, make the necessary adjustments to internal financial records to reflect accurate information. For instance, if an unauthorized charge is removed by the credit card company, that entry should be deleted from internal logs. For tax purposes, keep credit card statements and supporting documents for deductible expenses for at least three years.