Your Statement Balance vs. Current Balance: Do You Know the Difference?
- November 6, 2018
- Posted by: Jeff Gitlen
- Category: Credit Cards
When consumers call their credit card companies, they are often given two balances. They receive their statement balance and their current balance. The two are often different, which can be confusing.
After understanding these two balances, consumers can make smart choices regarding their credit cards.
A Closer Look at Both Balances
The statement balance refers to the amount the cardholder owed at the end of the last billing cycle. At the end of each billing cycle, credit card companies print the statement and send it to the consumer. The statement balance does not change until the end of the next billing statement.
The current balance includes all the cardholder’s transactions. If the cardholder charges something on the card after the billing cycle ends, it is reflected on the current balance.
That is why the current balance and the statement balance can be different. As long as the cardholder continues to use the card, the two balances will likely be different.
Statement Balance vs. Current Balance: Which is More Important?
Cardholders often don’t know which balance is more important, but it’s important to pay the correct balance in order to avoid costly interest charges.
Consumers must pay the complete statement balance to avoid interest charges. Interest is not accrued until the statement date. Purchase APR only kicks in on unpaid portions of the statement balance.
For instance, assume a cardholder has a statement balance of $300 and a current balance of $400. He pays $100 toward the bill. That leaves $200 on the statement balance, but he will still owe $300 total.
Interest will only accrue on the $200. Then, the remaining charges will go on the next statement, and if everything isn’t paid in full after that due date, interest will accrue on that amount.
It is different with cash advances though. Interest starts accruing on cash advances prior to the statement date, so cardholders should pay the current balance if it includes a cash advance. Otherwise, they will be charged interest right away. Cash advances do not have a grace period, while regular purchases do.
Interest isn’t the only thing to consider when determining which balance is most important. Most banks, including American Express, Capital One, and Chase, report the statement balance to creditors. However, some credit card issuers report the current balance. If the current balance is higher than the statement balance, it will impact the credit score in a negative way.
Consumers should check with their credit card companies to determine when they report balances to the credit bureaus. Then they need to make sure their credit cards are paid down before the time of reporting. Otherwise, they’ll end up with a higher credit utilization rate.
Bottom Line When It Comes to Credit Card Balances
Cardholders need to keep an eye on the amount they owe on their credit cards and pay them in full whenever possible. As long as they pay off their statement balances every month, they will be able stay on top of their debt. The alternative is missing a payment which could negatively impact your credit score.
Of course, it’s never a bad idea to pay extra when possible. The more consumers pay earlier on, the less they’ll ultimately owe on their credit cards.