What is a credit card balance?

Your credit card balance is the total amount of money you owe your credit card issuer. That amount may include purchases and other transactions made with the card, plus interest and fees. But there are two types of balances you might see when you check your statement or sign in to your account online.

What you’ll learn:

• A statement balance shows the amount you owe your issuer at the end of each billing cycle. 

• A current balance changes as you make new purchases and payments. 

• Making purchases with your card will increase your balance, while making payments will decrease it. Other factors like interest and fees may also impact your credit card balances.

• Making at least the minimum payment by your due date could help you avoid late fees and other penalties. But paying off your statement balance could help you avoid interest charges.

Many factors can influence credit card balances, including:

• New purchases
• Payments
• Interest
• Fees
• Balance transfers
• Cash advances

As you make credit card payments, 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.

Your balance can be reflected in two different ways. 

• Statement 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: Is a snapshot of the amount you owe at the time you 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 the current balance may fluctuate throughout the billing cycle as you make new charges and payments.

Your credit card statement will also show your minimum monthly payment. This is the amount your card issuer requires you to pay by the due date to keep your account in good standing and avoid late fees and derogatory marks on your credit reports.

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

Regularly checking your balances can help you understand exactly how much you owe. Reviewing your balances could also make it easier to spot unusual charges on your account.

The Consumer Financial Protection Bureau (CFPB) recommends paying as much as possible toward your statement balance each month. 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.

A negative balance on your credit card statement indicates that your card issuer owes you 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.

Carrying a negative credit card balance won’t negatively impact your credit score.

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

That’s because credit-scoring companies use your credit utilization ratio when they calculate credit scores. Your credit utilization ratio is a measure of how much of your available credit you’re using across all your revolving credit accounts.

A high credit card balance could negatively impact your credit utilization ratio. And a high credit utilization ratio could negatively affect your credit scores. That’s why the CFPB recommends “keeping your use of credit at no more than 30 percent of your total credit limit.”

There are strategies that can help manage high credit card balances and other debts. They include:

• Contacting lenders: The CFPB and the Federal Trade Commission recommend contacting individual lenders to investigate your options. Even small changes, like requesting a new due date, might make it easier to keep up with payments. 

• Applying for a balance transfer credit card: A balance transfer credit card lets you move debt from one credit card or multiple credit card accounts to another account. But it isn’t a specific kind of card. It’s any credit card that you use to consolidate or transfer debt. A common feature of some balance transfer offers is a limited-time low annual percentage rate for new purchases or balance transfers. If your transferred debt is paid off by the end of the card’s introductory period, you could save on interest. Keep in mind that you may have to pay a balance transfer fee.

Understanding how credit card balances work can help you manage your finances. And by checking your balance regularly, you’ll know how much available credit you have and how much you may owe at the end of each billing cycle.

Now that you know more about credit card balances, you may want to compare Capital One cards that might fit your needs. And you can see whether you have guaranteed card offers before accepting. It’s quick and it won’t hurt your credit score.