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If you’re an avid credit card user, you may have noticed that your statement balance often differs from your current balance. This can cause some confusion, especially when it comes time to pay off your credit card’s balance. Part of managing your credit card involves understanding the difference between a statement balance and a current balance. 

To navigate through the confusion, we will explore the difference between a statement balance and a current balance and discuss how which balance you pay at the end of the month have differing impacts on your personal finances. 

 What to do if you’re falling behind on credit card payments? Click here. 

What is Your Statement Balance?

Your statement balance is your credit card amount owing for a particular period of time. The statement balance reflects all of your expenses and payments for a specified time period. In a way, your statement balance is a snapshot of your credit card balance at a certain point in time. Your statement balance will remain the same until the next cycle is complete and a new statement is issued with a new statement balance. 

The period your statement balance covers depends on the credit card issuer. Some periods last 20 days, while others can be as long as 45 days. More often than not, credit card periods cover a month of activity or 30 days. 

The True Cost of Borrowing
Do you know what the true cost of borrowing is? Find out here.

What is Your Current Balance?

Your current balance is your credit card amount owing right now. It reflects the balance you owe on your credit card today which sums all your expenses and payments to date. Your current balance is constantly changing. Every time a transaction occurs on your credit card the current balance changes. 

The reason your current balance differs from your statement balance is that there was some activity on your credit card after your credit card statement was received. If you made more purchases on your credit card, your current balance will be higher than the statement balance. On the other hand, if you made a payment toward your credit card, your current balance will be lower than the statement balance. 

Can you use your credit card to improve your credit score? Find out here. 

Which Balance Should You Pay Off?

Paying the statement balance when it’s due will ensure that you don’t incur interest charges on your credit card. There is one exception to this rule which is cash advances. A cash advance starts to incur interest right away. Try to pay off the cash advance as soon as possible to avoid additional interest charges. Finally, instead of relying on your credit card for cash, work on building an emergency fund that you can dip into as needed.

You can also pay the current balance, instead of the statement balance, which will decrease your credit utilization ratio. A credit utilization ratio is the percentage of total available credit you are currently using. For example, if you have a credit card with a credit limit of $1,000 and have a $600 current balance, your credit utilization ratio would be 60% ($600 / $1,000). 

When you pay off the current balance, the total amount of credit you are using decreases which also decreases your credit utilization ratio. Lower credit utilization ratios help your credit score because, in the eyes of lenders, the less credit you are currently using, the better. By paying off the current balance, you will give your credit score a boost. A credit utilization ratio of 30% is ideal for the majority of lenders. 

Canadian Credit Score
For more information about the factors that affect your credit score, check out this infographic

How Minimum Payments Affect Your Balance

Making the minimum payment ensures that you won’t be charged a late fee, but often it doesn’t put a dent in paying off the total balance. When you have an overdue balance on your credit card, interest kicks in which grows your total amount owing, even after paying the minimum balance. Staying on top of credit card payments by paying the statement balance on time and in full will ensure that you don’t incur late fees or interest charges. 

Keep in mind that life happens, sometimes paying off your statement or current balance isn’t possible. If that’s the case, be sure to make the minimum payment at the very least to avoid late fees. 

Check out this article to find out the secrets behind your minimum payments. 

The Benefit of Using Automatic Payments

When you set up automatic payments on your credit card, the statement balance is paid automatically when it’s due. Many credit card issuers offer this feature to their customers. Using automatic payments will help you stay on top of credit card payments without having to actively think about it.

Part of using a credit card is managing it properly, especially if you want to preserve your credit score and financial position. Keeping tabs on your credit card’s statement and current balances helps you manage your finances better thereby leaving your wallet less stressed.

Veronica Ott avatar on Loans Canada
Veronica Ott

Veronica is a writer who specializes in creating unique and educational personal finance content. She has extensive experience writing blog posts for companies in the financial sector. Veronica's background is in accounting as she graduated from Western University in 2017 with a degree in accounting. She is passionate about using her accounting expertise to help others with their personal finance questions and issues and enjoys using her writing to educate Canadian readers. When Veronica is not writing, she enjoys film, reading, travelling, going to the gym, and listening to music.

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