Whether your goal is to use credit cards for convenience or to earn cash back or travel points as you spend, understanding how your credit card works is crucial to managing your account responsibly. This includes learning how and when your credit card interest accrues, how to avoid interest and which credit card fees can apply to your account.
You may see several different numbers when looking at your credit card bill each month: the minimum payment due, statement balance and current balance. While the minimum payment due is the minimum amount you must pay to keep your account in good standing and the statement balance is what you should pay each month to avoid interest charges, what about the current balance? Why is it often different from your statement balance, and do you need to worry about it?
Your statement balance is all of your credit card charges, plus any accrued interest, during your monthly billing cycle. And your current balance is your balance as of that moment, which can vary from hour to hour as you charge purchases to your card or receive credit back from returns. Here’s what you need to know about the difference between your statement balance and current balance, and which one you should use when calculating how much of your credit card bill you should pay each month.
What is a statement balance?
To understand your statement balance, you’ll first need to know how your billing cycle works. Your billing cycle typically runs between 28 and 31 days, with an average length of around 30 days. At the end of it, you’ll receive your credit card statement with a summary of transactions, including your purchases, payments, credits, balance transfers, cash advances, fees and interest charges. It will also include your statement balance, minimum payment due and your payment due date, among other details.
Your statement balance is what you owe on your credit card from the transactions you made during your last billing cycle. It also includes any interest accrued if you carried a balance from the previous billing cycle. It’s generated on the last day of your billing cycle -- your closing date -- and it won’t change until the end of your next billing cycle.
It’s important to pay off your statement balance in full before your payment due date. If a balance carries over from one billing cycle to the next, it will accrue interest. If you can’t pay off your statement balance completely, try to pay more than the minimum payment due to lower the cost of the interest charges. Again, the interest charges accrued during the previous billing cycle will be reflected in your statement balance on your closing date.
What is your current balance?
Unlike your statement balance, your current balance can change regularly. It represents how much you owe on your credit card at any given time. It’ll likely differ from your statement balance depending on how frequently you use your card. The number will reflect your most recent statement balance plus any transactions -- whether a payment or a new purchase -- you’ve made after your closing date.
For example, imagine you owe $515 on a credit card at this exact moment, meaning you have a current balance of $515. If you make a $35 purchase, your current balance will increase to $550. However, if your previous billing cycle’s statement is already closed, your statement balance won’t change. Instead, the $35 will be added to the current billing cycle’s statement balance, when your statement closes. It’s normal for your current balance to fluctuate, but your statement balance is a record of all purchases from the most recent billing cycle.
Why are your statement balance and current balance different?
The two balances might look different because your statement balance is locked in on your closing date and won’t change until your next billing cycle. Your current balance, on the other hand, will fluctuate depending on your card activity.
If you use your card to make a purchase after your closing date, like the example we showed above, your current balance will increase. Conversely, making a payment toward your current balance at any time will cause the balance to decrease. Meanwhile, your statement balance remains the same regardless of your card activity.
Should you pay your statement balance or current balance?
You have to pay your statement balance -- not your minimum payment due -- in full by your payment due date to avoid accruing interest. You don’t necessarily have to pay your current balance if your current balance is greater than your statement balance. Even if you use your card after your last billing cycle ends, your statement balance won’t change. Because your statement balance will typically be lower than your current balance, you might opt to pay only your statement balance because it’s the minimum amount you can pay to avoid interest without tying up too much of your cash for the rest of the month.
That said, you may opt to pay your current balance for accounting purposes or for debt avoidance. You can make payments toward your credit card’s current balance several times throughout the month to stay “ahead” of your debt or make sure you’re sticking to a budget or spending plan.
How your balance impacts your credit score
Your credit score can see a positive impact regardless of whether you choose to pay your statement balance or current balance in full. That’s because, ultimately, the most important determinant of your FICO credit score is your payment history (i.e., whether you pay your credit card bill on time).
Paying the statement balance, current balance or minimum payment due won’t matter when it comes to payment history since all three will satisfy the minimum payment requirement to keep your credit card account in good standing. If you were to pay only the minimum payment due on your credit card, however, the difference between your minimum payment amount and your statement balance would begin accruing interest until the amount was paid off. And, if you make only the minimum payment for the long haul, it can take years (or even decades) to pay off your balance, depending on how much you owe.
That being said, you can see a benefit to your credit score if you keep your credit utilization ratio at an acceptable level. This is because, in addition to payment history, both FICO scores and VantageScore credit scores also consider how much debt you owe in relation to your credit limits when determining creditworthiness. Most experts suggest keeping this ratio below 30% of your available credit, or owing less than $3,000 for every $10,000 in available credit, for the best results in this category.
Though paying off your current balance early isn’t required to avoid interest or keep your account in good standing, any additional payments you make toward your credit card bill ahead of schedule can have a positive impact on your credit score. That’s because extra payments keep your credit utilization lower, and as we mentioned, this is another important determinant of your credit score.
Correction: An earlier version of this article was assisted by an AI engine and it mischaracterized some aspects of credit cards. Those points were all corrected. This version has been substantially updated by a staff writer.
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