They employ the terms “statement balance” and “current balance” frequently for credit cards. These two names can sometimes refer to the same number, but they have a lot of variances.
It’s vital to understand some of the major phases and processes involved if you have a credit card, whether it’s for personal or commercial use.
Furthermore, you can rest if you’ve ever viewed your credit card bill balance and been astonished by the amount. You haven’t lost your mind.
The difference is that your credit card statement balance represents the amount you owed on the last payment cycle’s closing date. Any purchases you’ve made in the current billing cycle, as well as any pending purchases that haven’t yet been applied to your available credit, are included in your current balance.
You’ll learn what a statement balance is, what a current balance is, and how statement balance and current balance compare in this article.
What Does Statement Balance Mean?
Each credit card has a billing cycle that lasts around 30 days. (You can find details concerning your billing cycle in your cardholder agreement.) For a billing cycle, the statement balance summarizes all credit and debit transactions on your credit card account.
The statement amount includes any fees, interest, or penalties charged by the credit card provider, as well as any credits that have been provided, besides any purchases and payments you made during that time period (such as when you return a purchase).
The closing date—the last day of the billing cycle—is when they generate the statement balance.
If you don’t want to be charged with interest, make sure you pay off your statement balance in full each month.
Otherwise, they will carry over the portion of your statement balance that you do not pay over to the following month, and interest will accrue.
If you can’t pay off the debt on your account in full, make at least the minimum payment to avoid late fees and their terrible impact on your credit score.
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What Is Current Balance?
The current balance (also known as the credit card balance) is the total of all charges and payments made to your account up to that point in time. It contains fees, interest, penalties, and credits, as well as any purchases or payments you’ve made, much like the statement balance.
If you use your credit card frequently, your current balance will frequently differ from the balance on your statement. Why? While your statement balance represents what you owed at a specific point in time, they update your current balance regularly to reflect what you owe right now.
Assume your billing cycle for March concludes on March 15th. During that billing period, you made $500 in transactions with your credit card. The $500 statement balance from those purchases appears on the billing statement generated on March 15. If you use the same credit card to make a $100 purchase on March 16 and then check your account online, you’ll see that they show the $100 transaction in the current balance, but your statement balance remains the same.
Statement Balance vs. Current Balance: Similarities And Differences
Although your statement balance and current balance may appear to be similar, there are many differences. The following is a comparison of the two balance numbers:
Frequency
Any time you visit your account, whether online, through an app, in person, or over the phone, you can see your current amount. They update your current amount whenever they apply a charge to your account, which could be multiple times per day or once per month. They calculate monthly your statement balance and remain constant until the following month’s statement balance is determined. This does not imply that you haven’t changed your balance; rather, it means that the information on your statement was correct as of the day they produced it.
Method for calculation
They calculate the statement balance differently than the current balance. By adding any relevant interest and fees to your total balance at the moment, the statement balance is determined. Your current balance is essentially the balance from your last statement, with any additional charges or payments removed. Your current amount may show charges for purchases or cash advances, but it normally does not reflect the interest you will pay on such charges, which will not be reported until your next statement balance.
Payment requirements
A statement balance and a current balance have distinct payment conditions. They’ll usually prompt for your monthly payment after your bill balance has been determined. You can make a minimum payment or pay off as much as you want up to your entire loan. Your current amount does not show that you need to make a payment right now. But if you don’t, they will charge and display your interest in your next statement balance.
Cash advances
Because the interest in your advance hasn’t yet been computed and credited to your account, cash advances may show differently on your statement balance than they do on your current balance. So, if you took a cash advance, your current balance will just display the amount you received, but they will include the interest in that advance in your statement balance. Some credit cards charge a different interest rate for cash advances than they do for ordinary purchases, so knowing what that rate is can be useful.
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Interest
They always reflect an interest in a statement balance for any charges that have been accrued up to that point but have not yet been paid off. They may include interest from past statements in your current amount, but interest from additional charges incurred after your last statement will not be included. When your next statement arrives, they will calculate the interest. This is one reason: if you’re close to your credit limit, you can go over when your next statement calculates interest.
If you pay off all prior purchases and interest but make another purchase after your last statement balance, you can avoid paying interest on purchases by paying off that purchase totally before your next statement balance. They won’t charge you with interest if they pay the charge in whole before your next statement balance and you have no other debt on your credit card.
Credit reports
Credit card issuers typically report your balance to credit bureaus based on your statement balance, but some do so based on your current balance. You can find out which one your credit card business uses by contacting them. The reason this is important to know is that your credit usage, or how much of your available credit you are currently using, affects your credit status and score. You can pay extra on your credit card before the creditor reports your balance to credit agencies if you want to improve your credit rating.
Where you find the balance
They frequently find your statement balance and current balance in different places depending on your credit card company. Some firms design it such that you can quickly view both your online banking and your app when you log in. Other credit card issuers may prominently display your current amount. Whereas they only display your statement balance on your statement. However, when you make a payment, you may see both.
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Why Is My Statement Balance More Than My Current Balance?
Because your current balance shows the current amount of all charges and payments to your account — which varies every time a transaction occurs — your statement balance is higher than your current balance. Your current balance will be larger than your statement balance if you’ve made a few transactions since your statement closing date (the day when one billing cycle ends and the next begins).
If you’ve made a payment and have made no additional transactions since your statement’s closing date, your current balance will most likely be lower than your statement amount.
You can save money on interest costs by paying your bill balance in whole before or on the due date. Alternatively, paying off your existing bill in full by the due date will help you enhance your credit utilization ratio and credit health.
Should I Pay My Statement Balance or Current balance?
You should pay down your bill balance first. You can avoid paying interest on your credit card payment if you consistently pay off your statement balance in whole by the due date on each billing cycle. Therefore, you must try to pay off the statement balance for each billing cycle by the due date.
However, if you can’t afford to pay off your entire credit card statement balance by the due date, which there are a variety of very excellent reasons for, then make your minimum payment first.
As a result, you’ll be charged interest, but paying at least your minimum payment on time will help you avoid late fees and unfavorable points on your credit report.
Credit card issuers aren’t obligated to offer grace periods, but if they do, they must provide consumers with a grace period of at least 21 days after mailing or delivering their statement to allow them to pay down the balance listed on the statement, incurring no further interest charges. Check your credit card issuer’s terms and services to see whether anything similar is available.
Some transactions, such as cash advances, are exempt from the “grace period” laws that apply to most purchases. Instead, the instant you take one out, it accrues interest.
So, regardless of whether you’ve received your bill yet if you’ve recently taken out a cash advance on your credit card, we recommend paying it off as soon as possible.
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FAQs
Can My Current Balance Lower Than Statement Balance?
Although your prior billing cycle’s statement balance remains the same, your current balance includes any additional purchases or payments you’ve made since the previous closing date. Here, your current amount may be smaller than the balance on your statement.
Does Current Balance Include Statement Balance?
A billing cycle is a time between your last statement closure date and the next, which is usually 28 to 31 days. Your current balance is the total amount you owe on your credit card right now, including your previous statement balance and any subsequent charges.
What Does Last Statement Balance Mean?
Your most recent statement balance shows you must immediately begin making payments or form a repayment plan to repay what you have spent. You’ll be obligated, at the very least, to make minimum payments on your statement debt at this point.
Conclusion
When deciding whether to pay your credit card statement balance or current debt each month, it all boils down to choice and financial goals.
You’ll escape the interest costs that come with merely making minimum payments on your credit card transactions with either option.
Additionally, you’ll lower your credit utilization ratio, which may improve your credit health. Consistency with on-time payments is critical, as your payment history is a significant influence on your credit scores.
References
- https://www.experian.com/blogs/ask-experian/current-balance-vs-statement-balance/
- https://www.indeed.com/career-advice/career-development/statement-balance-vs-current-balance
- https://www.creditkarma.com/credit-cards/i/statement-balance-vs-current-balance
- Image source: parentportfolio.com
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