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What is a Credit Card Balance?

Last Updated: October 19, 2022
3 min read

Key Points About: What A Credit Balance Is

  1. Your credit card balance is the total amount you owe to your credit card company.

  2. Your balance is calculated by subtracting purchases you make from your total credit limit after factoring in the interest rate for charges made, any fees and charges on your account, and any unpaid other balances (previous purchases, balance transfers, or cash advances).

  3. Your credit card balance on a given day may be different than your statement balance when you receive it.

If you’re one of the millions of Americans that don’t pay off their credit card balance in full every month, you’re not the only one. Many carry credit card debt month-to-month.

Understanding exactly what your credit card balance is and how it’s calculated may help you make better financial choices when it comes to spending, budgeting and paying down your credit card balance responsibly. Make sure you’re educated about these basics of credit card balances:

What does a credit card balance mean?

Your credit card balance is the amount of money you owe to your credit card company on your account. It could be a positive number if you owe money, a negative number if you’ve paid more than you owe, or zero if you’ve paid off the balance in full.

How is a credit card balance calculated?

Your credit card balance is calculated using your recent purchases, unpaid balances (purchase, balance transfer or cash advance), interest charges and any fees or charges incurred during the billing cycle. You can find out your most current balance by logging into your credit issuer’s portal or calling customer service — and some offer mobile apps where you can check and pay off your balance.

Credit card balance vs statement balance vs minimum payment

Your credit card balance today may not be the same as your statement balance, which is what is shown on each statement.

When your billing cycle closes and you receive your statement, it will show you two things: your statement balance (it may also be written as “new balance”) and the minimum payment due. If you pay the statement balance in full by the payment due date each month, otherwise known as the grace period you won’t be charged interest on new purchases.

On the other hand, if you pay the minimum payment due, you will likely be charged interest on the balance. Be sure to check your cardmember agreement for details. It is best to pay off your credit card balance in full each month by the payment due date to avoid accruing interest charges on purchases.

What are statement credits?

You may have credits applied to your balance in a few instances: when you make payments to your credit card, when you redeem credit card rewards, or when you return items you purchased with your credit card.

Take this calculation as an example: If you had a balance of $100, meaning you owe $100 to your credit issuer, and then you receive a $500 credit from returning an item, for example, you would have a positive balance of $400. This is known as a credit balance. Basically, it’s a surplus of funds on your account. This surplus may be applied to your balance in the next billing cycle

Overall, keeping a close eye on your credit card balances will help you keep track of your spending and spot any potential errors. Doing so regularly also can alert you to possible fraudulent activity on your credit card account.

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