When consumers call their credit card companies or even their regular banks they are often given two different balances: their statement balance and their current balance. In many cases, these balances are different—and that can be confusing.
Let’s take a look at what these different balances are, how they work, and the impact they have on your finances. It’s easier to make informed decisions about your bank and credit card statement as well as your finances when you have all the facts.
On this page:
- What is the Statement Balance?
- What is the Current Balance?
- Reasons for a Difference Between the Statement Balance and Current Balance
- Your Current Balance and Your Credit History
What is the Statement Balance?
The statement balance refers to the amount the cardholder owes at the end of the last billing cycle. At the end of each billing cycle, your credit card issuer or bank will complete a statement and send it to you. You can usually choose to receive your statement through the mail or via email.
Your statement balance for your credit card account won’t change until the end of the next billing statement. All of your confirmed transactions, including credits and expenses, during the billing cycle are tallied along with your credit card interest charges. Your statement balance offers a snapshot of how much money you have at the end of the period.
With your bank statement, your statement balance will include deposits made and interest earned. That way you have a view of where your bank account stands at the end of the period.
What is the Current Balance?
The current balance includes all the cardholder’s transactions in the present moment. If the cardholder charges something on the card after the billing cycle ends, it is reflected on the current balance. Likewise, your current available bank account balance shows everything that is happening now, including debit purchases you might have made in the last few minutes.
While your statement balance only changes once each billing cycle, it’s possible for your current balance to change multiple times during the day, keeping you up to date as you spend money.
Reasons for a Difference Between the Statement Balance and Current Balance
The biggest reason your statement balance might be different from your current balance is due to the fact that your current balance is constantly updating based on what’s happening in your account.
Interest charges, deposits to your account, payments, and spending all continue happening, even after your billing cycle closes. Your current balance reflects the changing nature of your balance, whether it’s on a credit card or in a bank account.
Although you should make at least the minimum payment listed on the bill, understanding your statement balance is important because you can avoid interest charges by paying the entire statement balance. Interest is not accrued until the statement date, so you have a grace period before you have to worry about it. The purchase APR only kicks in on unpaid portions of the statement balance.
For example, let’s say your last credit card statement balance was $300. However, since then you’ve bought a few items and now your current balance is $400. You decide to pay $100 toward the bill. What you pay is put toward your statement balance, reducing it to $200. However, because you spent money since your statement was prepared, you still owe $300 total.
The good news, however, is that interest charges will only accrue on the $200 statement balance. Your new charges go on the next credit card bill, added to the remaining balance.
Cash advances are a little different. Interest starts accruing on cash advances prior to the statement date, so cardholders should include the full current balance in the credit card payment 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.
Your Current Balance and Your Credit History
Finally, with credit card balances, consumers should check with their issuers to determine when they report balances to the credit bureaus.
One important factor of your credit score is credit utilization, or how much of your available credit you’re using. If your credit limit is $1,000 and your current balance is $300, you’ve got a 30 percent credit utilization. The higher your credit utilization, the more it can negatively affect your credit score.
>> Read More: Credit Limit vs. Available Credit
Credit issuers report to the bureaus on a regular basis. However, if you make charges on your card, it can increase your credit utilization. Paying down your current account balance before the issuer reports to the bureaus can help you maintain a good credit score.
Credit Card and Bank Account Balances: The Bottom Line
Both your current balance and your statement balance matter and they serve different purposes.
Your statement balance can help you keep track of what’s happening each billing cycle and allow you to identify spending habits. It can also help you stay on top of debt and let you know how much to pay if you want to avoid interest charges, as well as help you avoid making late payments and seeing a negative impact on your credit score and incurring late fees.
Your current balance, on the other hand, can help you avoid overdrawing your bank account or running up too much debt since you know what’s available for your use immediately.
Understand how both types of balances can give you an idea of your financial situation and use them to make better choices about your financial situation.
>> Read More: How do credit cards work?