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What Is a Credit Card Balance? All You Need to Know

By Anna Davies · May 24, 2022 · 6 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

What Is a Credit Card Balance? All You Need to Know

Broadly speaking, the amount of money you owe to a credit card company from month to month is called a credit card balance. This is an important number to keep track of because if you don’t pay off your balance by the end of the billing cycle, you’ll owe interest.

However, when you go to pay, you might get tripped up on the difference between your statement balance and your current balance. Read on to learn more about what each type of credit card balance is, how you can check yours, and whether carrying a balance affects your credit score.

What Is a Credit Card Balance?

A credit card balance is the amount of money you owe to your credit card company, as well as interest and any fees.

When you look at your credit card bill, you may see two balances posted: your current balance and your statement balance. Your statement balance is the amount of money you owe from the previous billing cycle. Your current balance, on the other hand, is how much you owe at this moment in time. This amount could be higher or lower than your statement balance, depending on whether you’ve paid your credit card bill, charged more items to your credit card, or requested a credit card chargeback.

But when your billing cycle closes with a balance, what does that mean? It depends on your card issuer. Many card issuers have a grace period between when the credit card billing cycle closes and when payment is due. That means, if you pay your statement balance in full when payment is due, you will not accrue interest on any of the charges billed from the previous cycle.

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How Is a Credit Card Balance Calculated?

What does your credit card balance mean? It’s more than just whatever you’ve purchased during the previous month. A credit balance also consists of:

•   Any accrued interest

•   Late payment fees

•   Foreign transaction fees

•   Annual fees

•   Cash advances

•   Transfer fees

•   Any statement credits

•   Any payments made to the account

If you carry a balance, you’ll have to pay interest on the balance owed. The only exception is if you have a card with a 0% annual percentage rate, or APR, which is the interest rate charged when you carry a balance on your card. But generally, your card will have a grace period, during which interest will not accrue on the balance.

Differences Between My Credit Card Balance and Statement Balance

Your credit card balance meaning can vary depending on whether you’re discussing your statement balance or current balance. Your statement balance is how much you owe at the end of the billing cycle, whereas your current balance is a continuous tally of any credit card activity.

You will have a due date by which you’ll need to pay your statement balance. When your statement balance is paid, there may be activity on your balance as you continue to use your credit card throughout the month. The charges made after your statement balance is available will show up on your next statement balance. These charges, as well as any remaining amount from your statement balance, constitute your current balance.

Statement Balance

Current Balance

The amount of money you owe at the end of the billing cycle The amount of money you owe on the card right now
Remains the same until the end of the next billing cycle Updates every time you use your credit card
The amount you need to pay off to avoid interest charges The total amount currently owed on your credit card

Your Credit Card Balance and How It Affects Your Credit Score

Some people believe that carrying a balance may benefit their credit score, but that’s not true. Credit card companies do like to see credit card usage, but paying your balance in full is what can help your credit score.

One of the largest determinants of your credit score is your credit utilization ratio. This is the amount of money you’ve borrowed across credit cards compared to the amount of credit you have available. If you had a card with a credit card limit of $10,000 and you charged $3,000 on the card, for instance, your credit utilization ratio would be 30%.

In general, the lower your credit utilization ratio, the more helpful it is in building your score. It’s recommended to keep your credit utilization below 30%. By paying off as much of your credit card balance as you can in a statement period, you’ll lower the amount of money you owe, thus decreasing your credit utilization ratio.

Recommended: Tips for Using a Credit Card Responsibly

How to Check Your Credit Card Balance

There are many ways to check your credit card balance. You can do so online, over the phone, through an app, or simply keep an eye out for monthly statements, which may be mailed to you or securely delivered through email.

Online

An easy way to check your credit card account balance is to go online to your card issuer’s website, where you can set up your online account. You can then log onto this account to check your balance, pay any bills, and otherwise perform any account maintenance.

As with any sensitive information, make sure you keep your user information secure.

Recommended: When Are Credit Card Payments Due

Over the Phone

Your credit card company likely has a number that you can call to learn your balance, often from an automated voice that reads it off to you. It can also be helpful to know the number to your credit card company in case you want to dispute a credit card charge you don’t recognize or have questions about fees or anything else that appears on your statement.

Through an App

Your credit card company may have an app in which you can check your credit card balance. The app also may offer additional features, such as a breakdown of spending and your most recent credit score.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

Through Regular User Notifications

Depending on how you’ve set up your account, you may receive user notifications and statement balance updates through text message, email, or the mail, or a combination of all three.

Should You Carry a Credit Card Balance?

In general, carrying a credit card balance has the potential to hurt your finances and your credit score.

Sometimes, however, carrying a credit card balance can happen. Here are some ways to potentially minimize the negative effects of carrying a balance if you end up in a situation where you need to do so:

•   Look for a card with low APR. The lower the APR, the less interest you’ll pay on purchases. A good APR is one that’s below the current average, though what’s considered competitive can also vary depending on the type of the card and the individual’s credit score and history.

•   Pay more than the minimum balance due. Even if you can’t pay the full balance, paying as much as you can above the credit card minimum payment will help keep your credit utilization ratio low. It will also minimize the amount of interest you’ll pay over time.

•   Make a budget. Look through your expenses and find ways to pay down the card over a set amount of time. Some cards may offer the option to pay off certain purchases in installments, at a different interest rate than the overall card.

•   Treat your credit card as you would cash. If you don’t have the money right now, don’t spend on the card.

The Takeaway

A credit card can be a powerful tool — but carrying a balance can make it harder to achieve financial goals. Keeping track of your current balance and making a plan to pay off your statement balance in full each month can be helpful in allowing you to make the most of your credit card.

The SoFi credit card is designed to help you achieve your financial goals. You can redeem rewards to help pay down debt, save, or invest through SoFi. Plus, after 12 months of on-time payments, your APR will decrease by 1%. Apply for a credit card with SoFi today.

Learn more today about the SoFi credit card.

FAQ

What does a negative balance mean on a credit card?

A negative balance means the card company owes you money. This might occur due to a statement credit, a return, or you overpaying your bill. A negative balance won’t affect your credit score. When you make a charge on your credit card, the negative balance will be used to cover the payment.

Is it good to carry a balance on a credit card?

No. While it is good to use a credit card regularly and pay it off on time as a means of building your credit history, carrying a balance won’t help your credit score. In fact, if you rack up too much of a balance that it increases your credit utilization ratio, it could hurt your credit score.

What happens if you cancel a credit card with a balance?

If you cancel a credit card with a balance, you’ll still be responsible for payments, interest, and card fees. There may be downsides to canceling the card, too. That’s because part of your credit score rests on how long you’ve had open accounts.

Can I transfer my credit card balance to another card?

Yes. This is called a balance transfer. In a balance transfer, you’ll put your current balance on a new credit card. This can save you money on interest if you’re moving your balance to a lower-interest card. However, be aware that there are balance transfer fees involved. Also, a balance transfer may affect your credit utilization ratio.

Can I make partial monthly payments instead of settling the entire balance?

You can. Paying more than the minimum each month can minimize the effect of interest and lower your credit utilization ratio. To avoid interest entirely, however, you’ll want to pay off your statement balance in full each month.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Photo credit: iStock/Roman Novitskii
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