What is a credit card balance?

Understanding the difference between each type of balance on a credit card can be confusing at first. But knowing which balance you’re responsible for paying each billing cycle can help you properly manage your card. It can also help you pay less in credit card interest, fees and other penalties.

Here’s a breakdown of what credit card balances are, where to find them and some ways to manage them.

Key takeaways

  • A credit card balance is how much money a cardholder owes their credit card issuer.
  • Making purchases with the card will increase your balance. Making payments will decrease your balance. Other factors like interest and fees may also impact credit card balances.
  • A statement balance shows the amount the cardholder owes the issuer at the end of each billing cycle. A current balance, on the other hand, changes throughout the billing cycle as the cardholder makes new purchases and payments. 
  • Pay off the full statement balance by the due date each month to avoid interest charges. And avoid late fees and other penalties by always paying at least the minimum payment by the due date.
  • The Consumer Financial Protection Bureau (CFPB) recommends paying off as much of your full balance as possible. The CFPB also says that paying off your entire balance each billing cycle can help improve your credit scores.

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What does credit card balance mean?

A credit card balance is the total amount of money a cardholder owes the credit card issuer. That amount may include purchases and other transactions made with the card, plus interest and fees. 

How is a credit card balance calculated?

Many factors can influence a credit card balance, including:

  • New purchases
  • Payments
  • Interest
  • Credit card fees
  • Balance transfers
  • Cash advances

As payments are made, the total balance decreases. Paying off the entire balance each billing cycle can help you avoid interest charges altogether. Late or missed payments may lead to fees, interest charges and other penalties. Making at least the minimum payment on time can help you avoid these fees and penalties, but interest may still be charged on any remaining balance.  

An illustration showing a calendar page, three dollar bills and the word “paid,” all inside blue bubbles.

How to check your credit card balance

You may be able to check your credit card balance by using your issuer’s mobile app, signing in to your online account or reviewing your paper statements.

Regularly checking your credit card balance can ensure you know exactly how much you owe and make it easier to spot any unusual activity on your account.

Understanding balances and credit card statements

There will likely be a few balances listed on your credit card statement. Knowing the difference between each type of credit card balance can help simplify card management.

Here’s a breakdown of common balances:

Statement balance

A statement balance, sometimes called a new balance, shows how much you owe at the end of each billing cycle, which is typically 20–45 days. It’s the total of all purchases, fees, interest and unpaid balances, minus any payments or credits.

Current balance

The current balance is a snapshot of the amount a cardholder owes at the time they check it. Like a statement balance, a current balance also captures the total of all your purchases, fees, interest and unpaid balances, minus any payments or credits. But unlike a statement balance, the current balance may fluctuate throughout the billing cycle as you accrue new charges and make payments.

Minimum monthly payment

The minimum monthly payment is the amount an issuer requires a cardholder to pay by the due date. Making at least the minimum payment on time keeps your account in good standing. And it also will help you avoid late fees and derogatory marks on your credit reports. But interest might be charged on the unpaid portion of your statement balance. One way to avoid or reduce interest is to pay off your entire statement balance every month.

Negative balance

A negative balance on a credit card statement indicates that the credit card company owes the cardholder money. This can happen after returning an item that results in a refund, overpaying your balance or receiving cash back as a statement credit from a cash back credit card.

Should you carry a balance on your credit card?

The CFPB recommends paying as much as possible toward your full statement balance. Doing this can help you pay off your credit card debt more quickly and help limit the interest you’ll owe over time. The less interest you’re charged, the lower your future card payments could be.

The CFPB also says that paying off your entire statement balance each month can help improve your credit scores.  

Does a high credit card balance affect your credit score?

Carrying a credit card balance isn’t just costly. It can affect your credit scores, too.

Credit card issuers typically report your balance information to credit bureaus after each billing cycle. But the exact timing can be different for each issuer. And because your credit reports show the balance on your card when the issuer reported the information, the reported amount might be different from your most recent statement balance.

Credit-scoring companies use your credit utilization ratio when calculating credit scores. Your credit utilization ratio measures how much credit you’re using—basically, your current balance for all your credit card accounts—compared to the amount you have available. The CFPB recommends keeping your credit utilization below 30% of your total available credit. 

How to manage high credit card balances

Here are a few strategies that may help you manage high credit card balances and other debts: 

  • The debt avalanche method: With the debt avalanche method, you start by paying off the debt with the highest annual percentage rate (APR) while still making the minimum payments on all other debts. Once the highest APR debt is paid off, you focus on the debt with the next-highest APR, and so on, until all your debt is paid off. 
  • A credit card balance transfer: A balance transfer lets you move one or more of your credit card balances to a new issuer. Some balance transfer cards have a low or 0% introductory APR offer. If your transferred debt is paid off by the end of that introductory period, you could save a considerable amount on interest. Keep in mind that you may have to pay a balance transfer fee.
  • Debt consolidation loans: These are a type of personal loan that can be used to pay off credit card debt. Like a balance transfer, a debt consolidation loan can also be a useful tool for combining multiple debts into a single monthly payment. And if the loan has a lower interest rate, you may be able to pay off your debt faster. 

Credit card balances in a nutshell

Understanding the different kinds of credit card balances can be an important part of managing your finances. It’s a good idea to check your balances regularly, too. That way, you’ll know how much available credit you have and how much you owe at the end of each billing cycle.

You can also monitor your credit to see how factors like your credit card balance impact your credit scores. CreditWise from Capital One is a free tool that lets you monitor your VantageScore® 3.0 credit score and TransUnion® credit report. Using CreditWise won’t hurt your credit score. And it’s free for everyone, even if you’re not a Capital One cardholder.

Louis DeNicola, contributing writer

Louis DeNicola is a freelance writer who specializes in consumer credit, finance and fraud. He has several consumer credit-related certifications and works with lenders, publishers, credit bureaus, Fortune 500s and FinTech startups. Outside of work, you can often find Louis at his local climbing gym or cooking up a storm in the kitchen.

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