- 1 What’s The Difference Between Balance on a Credit Card and Balance on a Statement?
- 2 What Is a Statement Balance?
- 3 Why is a ‘Current Balance’ Credit Card?
- 4 When Do You Pay Interest on a Loan?
- 5 How does the amount of debt you carry affect your credit rating?
- 6 Is it better to pay off my current balance or the statement balance?
What’s The Difference Between Balance on a Credit Card and Balance on a Statement?
Looking at your credit card statement or online account, you’ll come across a slew of terms that may confuse you. Many people get their current balance credit card and statement balance mixed up, and that’s understandable.
There is a significant distinction between the two terms: a current balance credit card refers to your total credit card debt as of the current day, whereas a statement balance only shows the charges and payments you made in recent billing cycles. Your credit score is affected by both your current and your statement balance.
What Is a Statement Balance?
A statement balance is an ending balance on your most recent credit card statement. This balance includes any new charges, payments, interest, and fees that have been applied to your account since the last statement was issued.
Your statement balance is typically due in full each month, and failure to pay it off can result in late fees and interest charges. However, some credit cards offer grace periods for paying off your statement balance, so it’s important to read the terms and conditions of your card carefully.
If you carry a balance from month to month, your statement balance will continue to grow as interest and fees are added to the outstanding balance. In order to avoid paying interest on your purchases, it’s important to pay off your statement balance in full each month.
Why is a ‘Current Balance’ Credit Card?
Your current balance is the amount of money in your account at any given time. This includes any deposited funds, as well as any pending or authorized transactions. It can fluctuate throughout the day as deposits are made and debits are processed.
It’s important to keep track of your current balance so that you don’t overdraft your account. You can typically find your current balance on your bank statement or online banking portal. If you’re ever unsure of your current balance, you can always contact your bank or financial institution for help.
A discrepancy between your current balance and your statement balance is common if you regularly use your credit card. Why? As opposed to a one-time snapshot of your debt, your current balance updates in real time to show you exactly how much you still owe.
When Do You Pay Interest on a Loan?
You will not incur additional interest if you pay off your monthly statement balance in full by the due date. Any remaining balance will go to your current balance and will begin to accrue interest as soon as you do not pay the entire statement balance.
You should at least make the minimum payment on your statement balance to avoid interest charges. If you pay on time, you will avoid late fees and the possible damage to your credit score that comes with missing one of your payments.
Setting up automatic bill pay is an excellent way to ensure you don’t miss any payments on your credit cards. Credit card companies can withdraw the monthly statement balance from a designated bank account. To ensure you never run out of money to pay your credit card bill, you can set up automatic payments at a time that suits your schedule, such as the day after your payday
You may not be able to pay your statement balance in full each month if you are unsure of your financial situation. As a result, you may never know how much money you have left in your bank account at the end of each month. You can also set up automatic payments for the minimum payments. Your credit score will improve if you make any or all payments on time.
How does the amount of debt you carry affect your credit rating?
Your credit score is affected by both your current and statement balance. Credit card companies report your credit card usage to the three major credit bureaus: Equifax, TransUnion, and Experian.
The credit bureaus use the total sum of revolving credit you have and the balance in your account to calculate how much of your available credit you use.
Use your credit card balance to find out what percentage of the available credit you are currently using. Using half of your available credit means, for example, that you have a 00 balance on a card with a $2,000 credit limit.
The second most important factor in determining your credit score is your credit utilization ratio. The lower your credit utilization ratio is, the better your credit score will be. Credit bureaus may view excessive use of credit as a sign of financial distress. A ratio of 30% or more can harm your credit score using the FICO® Score and VantageScore® credit scoring models.
You can reduce your credit utilization ratio if you pay your bill in full each month. Your credit utilization ratio will increase if you only pay the minimum payment on your credit card and don’t pay off the rest of the balance. If your debt-to-income ratio exceeds 30%, it may negatively impact your credit score.
Is it better to pay off my current balance or the statement balance?
You don’t have to pay off your entire balance to avoid interest. Just the balance on your credit card statement. You can avoid interest and late fees if you consistently pay your bill in full by the due date. You can improve your credit utilization ratio and credit score if you pay off your current balance early if you’ve made additional charges since your last billing cycle.
Even if you can’t pay off your entire account balance, you should make a payment equal to the bare minimum. As a result, your credit rating can be protected. Furthermore, you won’t have to worry about paying late fees or other penalties.
You can also use the Capital One Mobile app to set up automatic payments and bill reminders. If you pay on time, know your balance, and keep your account in good standing, these can help you do so.