Difference Between Statement Balance and Current Balance
Posted by Frank Gogol
It’s not unusual to be confused when it comes to terms related to banking. Two things that people are often confused about and don’t understand are statement balance and current balance. Many don’t know the difference between the two and are not sure what to expect from these balances. Thankfully, we took it upon ourselves to explain this to our readers so check out the following paragraphs to learn the difference between statement balance and current balance.
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What Is a Statement Balance?
A statement balance refers to an overview of all the debits and credits you have on your credit card during a certain billing cycle. There is a billing cycle for every credit, and it lasts about 30 days. Apart from the payments and purchases you made within that certain amount of time, things such as penalties, interest, fees, or anything of the sort charged by your credit company will be showcased too. When the last day of the billing cycle arrives, aka the closing date, that’s when the statement balance is created.
If you pay the statement balance in full every month, then you will not have to deal with being charged interest. This is why it’s always important to make a full payment every month. When you don’t pay, the statement balance will be carried over to the following month, and that’s when you’ll start getting interest.
But in case something happens and, for some reason, you cannot make a full payment for the statement balance, you should at least make the minimum payment. It would be much better than not making any payment at all and dealing with the consequences, such as fees for late payments. Not paying anything would also affect your credit score.
What Does Current Balance Mean?
The current balance is also known as the credit card balance. It refers to the number of charges and payments that are currently on your account, which were made to your account up to that specific day. Similar to a statement balance, this shows the interest, fees, credits, and penalties. It also showcases the payments or purchases that you’ve made.
But while there are similarities, there’s something that sets the current balance apart from your statement balance. Usually, the current balance will be different from the statement balance. This is because the statement balance is an image of the amounts you owed at a certain moment in time. Meanwhile, the current balance shows the amount you owe right now. It is constantly changing, so it’s accurate.
For instance, let’s say that your billing cycle ends on October 30. During that particular billing period, you make purchases worth $800. So, the billing statement that is generated on October 30 will show $800, which represents the purchases made during the billing period. But if you make a $200 purchase on October 31 using the same credit card, then the additional $200 will be shown on your current balance. Meanwhile, the statement balance will stay the same as it was on October 30.
Impact on Your Credit Score
It’s important to bear in mind that your credit score can be affected by your statement balance and your current balance. At the end of your billing cycle, the credit card company will send a report of your card usage to the three big credit bureaus. Afterward, the credit bureaus will use the information they get, as well as the total revolving credit amount available to calculate your credit utilization ratio. This is going to help them find out the available credit percentage that you are using right now.
If you want to discover your credit utilization ratio, you have to divide the current balance on your credit card by the spending limit for the particular credit card. So, when your balance is, let’s say, $500 on a card with a credit limit of $1,000, then you are now using 50% of the available credit on the card.
When determining the credit score, the credit utilization ratio is the second most important factor that influences it. The lower the amount of credit utilization ratio that you have, the better the effect that it will have on your credit score. Just like that, using too much credit will hint to credit bureaus that you may have financial problems. Under the VantageScore and FICO Score credit scoring models, your credit score can be negatively affected even if you have a ratio of 30% or higher than that.
The credit utilization ratio can be decreased if you make sure to pay your statement balance in full every month. If you only pay the minimum payment and let the rest of the money for the following month, your following utilization ratio will grow. When it goes over 30%, that’s when your credit score will be affected.
When Do You Get Charged Interest?
Interest is not going to be charged more than usual if you make sure to pay off your statement balance fully by the due date monthly. But if you don’t pay off the entire statement balance, the balance that remains is going to roll over to your current balance and it will start accruing balance. This is why it’s important to make the minimum payment if you cannot make the full payment. Doing this will help you avoid any late fees, and your credit score will not be affected as a result.
You can start setting up automatic bill pay if you want to be sure you don’t miss any payment. This will automatically pay off the amount on your balance for you, and you’ll never be late. Set this up by adding a date that you think is convenient, and that’s when you’re going to be charged. It needs to be a day when you’re sure you have money in your account.
However, you may not always be able to pay the full amount every month, in which case you can just simply set it to take your minimum balance only. Therefore, you will not miss making a payment and your credit score will not take a huge blow.
How to Find Your Statement Balance and Current Balance
Finding your statement balance and current balance is not difficult. You only have to log into your account, and then your statement balance and current balance will be shown by your issuer on the main page. They are easily visible, so you don’t have to dig too deep to find them, which is great.
It’s important to understand the difference between statement balance and current balance if you want to know what each of them represents and which one you have to check. The current balance will show the amount you owe up to this day, which includes the purchases made after the end of the billing cycle. Meanwhile, the statement balance only shows the amount of money used up to the last day of the billing cycle. Thus, make sure you check them carefully and that you pay at least the minimum balance every month so that your credit score isn’t affected negatively.