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Your statement balance is the amount you owe on your credit card as of the latest billing cycle. Your current balance refers to all unpaid charges on an account, up to the date of your inquiry. The two are often different, especially if you use your credit card day-to-day. As a cardholder, you are responsible for paying your statement balance, or a portion of it, to avoid any negative consequences, such as late fees or negative marks on your credit score.
Statement Balance vs Current Balance: Which One Should You Pay To Avoid Interest?
Regular Purchases If you want to avoid interest from regular purchases, you need to pay off your statement balance. Purchase APR is applied towards any unpaid portions of your statement balance only. While you may have a current balance above $0, you still won't be on the hook to pay interest on it, you'll be in the clear so long as your statement is paid off in full. However, if you want to be dilligent about your finances, it's best to always pay your entire balance — that means your current balance. The one advantage to keeping your current balance at, or near, zero is that you keep your credit line open. Paying off your current balance can also keep your credit utilization remains low, which can have a positive impact on your credit score.
Cash Advances If you have taken out a cash advance since your statement closed out, you will need to pay the current balance to avoid any charges from accumulating. If you pay just your statement balance, because of the way payments are applied, you will end up having to pay interest on that cash advance. Any minimum payment you make is applied towards the balance with the lowest APR first. Cash advances typically have a higher interest, so you would not make any dent in that balance. Any payments in excess of the minimum are then applied towards the highest APR balance, though only on any transactions that have been closed out on a given statement. Thus, if the cash advance is not on your statement balance you won't erase any part of it unless you pay the entire bill.
The reason cash advances throw a wrench in the statement/current balance topic is that they don't adhere to any grace period, which we explain in more detail in the following section.
How Is Your Statement Balance Decided?
The statement balance is made up of any transactions that occurred during the last billing cycle, as well as any previous unpaid balances. The length, in days, of the cycle varies from bank to bank. Some last 20 days, while others may span 45. The CARD Act of 2009, dictates that you have, by law, at least 21 days to pay your statement balance from the day your company delivers you the bill. Some credit card companies may extend that by a few days. This period is usually referred to as a grace period, and no interest charges will be charged to the account so long as the statement balance is paid in full by that time.
Cash advances have no grace period, meaning they begin accruing interest immediately from the moment the transaction happens. Normally, consumers only need to worry about interest charges coming from any statement balance left unpaid past a grace period. Cash advances are unique in this regard, which is why it becomes important to pay your entire current balance, if one is posted to your account.
How Your Statement Balance and Current Balance Can Impact Your Credit Score
Depending on your bank or card issuer, your statement balance or your current balance may have an impact on your credit score. Every month, card issuers report their customers' outstanding debt to the credit reporting agencies. This information is then used in many credit scoring models to assess your creditworthiness. Though many credit scoring models exist, the most popular one is FICO 8. In this model, utilization accounts for as much as 35% of your entire score.
Most of the largest card issuers in America — including Chase, Citibank and Bank of America — report your statement balance and not your current balance. However, some break away from this trend. For example, U.S. Bank has been reported as sending cardholder information on the current balance as of the 1st of every month.
|What Utilization Is Reported To The Bureaus|
|American Express||Statement Balance|
|Bank of America||Statement Balance|
|Capital One||Statement Balance|
|ELAN||Last day of the month|
|Navy Federal Credit Union||Statement Balance|
|PenFed||Second Saturday of each month|
|US Bank||First day of each month|
|Wells Fargo||Statement Balance|
If you want to keep your utilization low, you should prioritize keeping your statement balance low. To do this, make payments to your credit card bill throughout the month. Check with your credit card issuer to know exactly when your balance is reported. This will allow you to plan around that fact.
Consumers should generally not put too much emphasis on utilization, as the effects on your credit score are minimal unless you begin going over 50% utilization. For FICO 8 scores, consumers should try to keep their utilization below 30%. However, going slightly over that figure won't have a huge negative effect on most people's credit scores.