What’s the Difference Between Statement Balance and Current Balance?

Whenever you check your credit card balance, you will be presented with two balances, a statement balance and a current balance. These balances are different and can be confusing, especially when you are trying to find out which balance you should pay first to avoid interest charges and improve your credit utilization ratio.

Statement Balance Vs. Current Balance

Your statement balance is the amount you owe on your credit card at the end of your previous billing cycle. Your current balance is the total amount you owe on your credit card account up to date. You need to pay your statement balance in full on the due date to avoid interest charges and current balance in full to improve your credit utilization ratio.

Pay Your Statement Balance to Avoid Interest Charges

You can avoid added interest charges by paying off your statement balance in full on the due date every billing cycle. If you cannot pay off your credit card statement balance in full, then you must make an effort to pay at least the minimum amount. This will help to avoid negative marks on your credit report and late fees. 

Some credit card providers may offer customers a grace period of 21 days from the date of mailing or delivering a statement balance. The grace period will allow you to pay off your balances with no additional interest rates. 

Use Automatic Payments to Avoid Interest Charges

Most credit card providers offer automatic payment option to their customers. If the autopay option is available, you can select “statement balance” as your choice. This will make sure your statement balance is paid on the due date and help you avoid late payment and interest charges. Remember to check whether you have enough funds in your account to process the payment.

How Your Current Balance Affects Credit Utilization Ratio

Your current balance may have an impact on your credit utilization ratio, depending on how your credit card provider reports your account balances to the credit bureaus.  Generally, the credit utilization rate is the amount of available credit you are using. If you want to improve your credit score, you should not use more than 30% of your available credit limit. If you keep your credit utilization ratio under 20%, you will get an excellent credit score.

Credit bureaus calculate a customer’s credit utilization ratio based on the balances they receive from the credit card provider. You can check with your credit card provider to determine whether they send your statement or current balance to the credit bureaus and pay off your balances accordingly. 

However, it would be a good choice to pay off your current and statement balances on time to avoid interest charges and poor credit scores.

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