When you log into your online account to manage your credit cards, you’ll typically see two balances: a statement balance and a current balance. If you’re new to credit cards, understanding the difference between the two can be confusing. This article explains what each term means so you can avoid fees and keep track of your finances.
Breaking Down Your Credit Card Payment Info
Let’s start by breaking down the different components of what you might see when you log into your online account. Here’s an example from my Chase Sapphire Preferred Card:
Here’s what each of those terms mean:
- Current Balance: Your current balance is the balance you have on both your previous statements and current purchases. In this case, my most recent statement was September, comprising purchases made from August 2 - September 1. Any purchases made after September 2 are also included in this current balance.
Your current balance impacts how much available credit you have left.
- Available Credit: When you open up a credit card, the credit card company issues you a line of credit - the amount you can “borrow” on your credit cards. Let’s say your credit line is $15,000 and your current balance is $12,000, you only have $3,000 left of available credit that you can spend on that card.
- Balance on Last Statement: Otherwise known as the statement balance. Credit cards have billing cycles which are determined by when you opened up that specific card. For example, my Chase Sapphire Card is due on the 26th of each month and my billing cycle is from the second of each month to the first of the next month.
For example - when I pay my statement balance for my September statement on the 26th of the month, it’s for all the purchases i made between August 2 - September 1.
Avoiding Fees and Interest
Make sure you avoid fees by paying off your bill on time. Automatic payments and bill alert reminders are a great way to stay on top of your account.
Paying just the minimum: Even though you’re allowed to carry a balance every month and pay interest on those purchases (how card companies make most of their money) you still have to pay the minimum on your statement balance. In my case, that minimum is $25. If you don’t pay at least $25, you’ll not only pay interest but a late fee and your account can go into bad standing
Paying your full statement balance: The best way to avoid paying and fees and interest is my paying off your bill in full each month. Anything not paid from that statement balance will start to accrue interest, ranging from 14% to 30% depending on your card.