Statement balance vs. current balance: What’s the difference?

You’ve probably heard the advice to pay your credit card balance on time and in full to improve your credit score. But it can be confusing to learn that your card has both a statement balance and a current balance. Which one should you pay? And how can you avoid interest charges? In a nutshell, your statement balance is the amount you owe at the end of a billing cycle. And your current balance is the amount you owe at a particular moment. Learn more about why these balances are different and how they can affect your credit score.

What is a statement balance?

A credit card statement balance shows the amount you owe on the last day of the billing cycle. It includes the total of any purchases, interest charges, fees and unpaid balances from the billing cycle, which can last from 28 to 31 days. The statement balance is listed on the monthly statement from your credit card issuer. Keep in mind that the beginning and end of a billing cycle can fall on any day of the month and aren’t dictated by calendar months.

What is a current balance?

The current balance reflects all of the purchases, interest charges, fees and unpaid balances on your credit card at the time that you check it. That’s why it’s called your current balance — it’s a real-time balance. Keep in mind that it’s different from your available balance. For example, if you buy a pair of shoes with your credit card after the statement balance was calculated, that purchase becomes part of your current balance, not your statement balance. Depending on your credit card activity, the current balance can fluctuate from day to day or even minute to minute.

Why is the statement balance different from the current balance?

It’s pretty common for the current balance to be higher than the statement balance. Let’s say your credit card company issued your statement on July 31, and the statement balance was $600. Your payment won’t be due until at least 21 days later, thanks to the Federal Credit CARD Act of 2009. In the meantime — before you pay the bill — you buy that pair of shoes, which costs $75. With the new $75 shoe purchase, your current balance would increase to $675. But your statement balance would remain at $600 because the new purchase would show up as part of the next statement’s billing cycle. On the other hand, your statement balance could be higher than your current balance if you received a refund after the billing cycle ended. Of course, both the statement balance and current balance should be the same if you don’t have any transactions on your credit card between monthly billing cycles.

Should you pay your statement balance or current balance?

When you’re looking at your credit card bill, you might wonder whether it’s best to pay the statement balance or the current balance. Either will let you avoid interest, so it’s a matter of preference.

• Pay the statement balance: This means paying exactly what’s due. If you pay off the total statement balance by the due date, then you won’t pay interest on purchases from the last billing cycle.
• Pay the current balance: This covers your statement balance plus any charges you’ve made since the end of the billing cycle. It will bring your balance to $0, which is good, but not necessary to avoid interest.

Most credit card issuers offer autopay, where you can set up an automatic payment to your balance each month. You can typically choose to automatically pay the minimum payment, a custom amount or the full statement balance. Keep in mind that if you pay any less than the full statement balance, you’ll accrue interest.

What if you can’t pay the statement balance?

If you don’t have enough money to pay the statement balance or current balance, you can at least make the minimum payment to avoid late fees and a ding to your credit score. Paying only the minimum amount due means the remainder of your statement balance will start accruing interest. And as you carry a balance, those interest charges can rack up. It may end up taking more time to pay off your balance in full. It’s a good idea to pay more than the minimum payment — ideally the full statement balance — each month, if you can. You’ll save on interest, lower your balance and avoid debt.

How your balance impacts your credit score

Both your statement balance and current balance can affect your credit score. Credit card issuers typically report cardholder activity — including your balances and recent payments —  to the three major credit bureaus at the end of a billing cycle. If you pay off your statement balance during the grace period, or between the billing cycle end date and the due date, you probably won’t have to pay interest. And as long as you make at least the minimum payment during this time, you won’t have a late payment to hurt your credit score. Additionally, your credit utilization ratio is a credit-scoring factor that compares the amounts you owe on all credit cards (your total balances) with the amount of credit you have available (your credit limits). For example, if your credit card balance is $2,000 and your limit is $10,000, then your credit utilization ratio is 20 percent. Your credit utilization ratio makes up 30 percent of your FICO® Score and around 20 percent of your VantageScore®. The lower your credit utilization ratio, the better. Paying on time and in full can boost your credit score over time. And a high credit score could lead to being approved for better credit cards, lower interest rates and higher credit limits.

The bottom line

It’s important to know how to read your credit card statements. And that includes understanding the difference between your statement balance and current balance. You can avoid interest charges by paying either balance. If you can’t afford to pay the full balance, you should at least make the minimum payment to avoid hurting your credit score. The right credit card can help you build your credit and earn rewards, as long as you use it responsibly. Check out today’s top credit cards to see which one might be a good match for you.