If you’re one of millions of Americans that don’t pay off their credit card balance in full every month, you’re not the only one. A 2016 Gallup poll found that 48% of Americans carry credit card debt month-to-month. While a credit card balance may seem straightforward, when you understand exactly what it is and how it’s calculated, it can help you make better financial choices when it comes to spending, budgeting and paying down your credit card balance responsibly.

Credit Card Balance: a Definition

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, interest charges and any fees 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.

Statement Balance and 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 — the period of time after receiving the statement — you won’t be charged interest on purchases. On the other hand, if you pay the minimum payment due, the remaining amount of the balance could be subject to interest charges. Be sure to check your cardmember agreement for details. It is best to pay off your credit card balance in full each month to avoid accruing interest charges.

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 receive credit card rewards (or you credit yourself with rewards you’ve earned), 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. Alternatively, you could call the credit card company and ask them to send you the surplus of money via check.

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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