Residual amplitude modulation is one of the major stability-degrading factors in many precision measurements. Using an electro-optic (EO) crystal with wedged input and output surfaces is an effective way to suppress residual amplitude modulation. Here the mechanism of residual amplitude modulation in this approach is investigated. The residual amplitude modulations measured in standard and wedged EO crystals bear similarities in their temperature and polarization dependences, implying that a mixture of the two orthogonal polarizations in the extraordinary light is responsible for the residual amplitude modulation in the wedged EO crystal. Similar to a standard EO crystal, a non-uniform spatial distribution of residual amplitude modulation is also observed in the extraordinary light emerging from the wedged EO crystal. The optical isolator after the EO crystal is replaced by a Faraday rotator, and an improvement in the long-term stability is observed. With the wedged-crystal approach, residual amplitude modulation as low as 2×10-7 is observed, contributing a frequency instability of 8×10-18 (500 s) in Pound-Drever-Hall frequency stabilization with a discrimination slope of 1×10-4 V/Hz.