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Understanding Credit Card Balance

July 4, 2017

When you check your credit card balance, you are given the statement balance and the current balance. What is the difference between these two balances? Which one should you pay in order to avoid paying interest?

Statement Balance vs. Current Balance

Let’s backtrack for a second. Credit card statements are issued at the end of each billing cycle. You’ll always be able to check the statement of the most recently finished billing cycle. The balance you had on the last day of that cycle is the statement balance.

It’s likely you’ll either have paid off some of that balance or made more transactions. The balance you’re running at that given moment, which sometimes includes transactions that are being processed, is your current balance.

Your current balance will rack up until the last day of your billing cycle, and once again, that will be your new statement balance.

How do you avoid paying interest?

Credit card companies will charge you with interest if you carry over a balance to the next billing cycle. So you should aim to pay off the entire balance before the beginning of a new billing cycle.

If, by any missed opportunity, you’re running a statement balance over to the next cycle, pay it off by the end of the grace period. Though the grace period is typically 20 to 25 days, it differs from card to card. Look for it in your credit card agreement or statement.

Don't incur a late payment

If you can’t afford to pay off your entire balance, pay at least the minimum by the due date. If not, a delinquency for late payment will go on your report. As we talk about in this article, late payments can be disastrous for your credit score.