Have you taken out your first-ever credit card, taken one look at the balance, and been left flummoxed? You’re not alone!
Credit cards can be a murky world that not many people understand straightaway, leaving them with heftier bills than expected and headaches wondering what it all means.
But wonder and worry no more! Today we are here to discuss what a credit card balance is and when and how you should pay the balance.
Keep reading for all the information you need to know about credit card balances.
Let’s get straight into it: a credit card balance is the total amount of money that you owe on your credit card.
It will be a combination of your spendings on the credit card, any interest you might have incurred, and charges on the card (like exchange rates or charges for cash withdrawals).
Commonly you will see the balance that you owe and the remaining amount on the credit card. For example, if you have a credit card allowance of $1,000 and have spent $250, you will see a balance of $250, with a remaining balance of $750.
You will need to pay the $250 but can still spend the remaining $750 balance if you wish.
You are likely to be sent your balance every month by post, or you can view your balance on any banking apps you might use. There will be a date range that the balance is taken from (for example, the 1st to 21st of a month), and there will be a date stated where you need to pay it.
That all sounds fairly simple, doesn’t it? But there are a few different balances, so let’s take a closer look at them now to help you understand what your balance is.
When you get your credit card balance, you need to be aware of three different balances and payments. Let’s take a closer look at those now!
Your statement balance arrives at the end of a billing cycle, usually monthly or quarterly, depending on your credit card company. Depending on your preference, the statement will come via the post or be displayed on a banking website or app.
There will be a date stated that you need to pay this by, and you will be shown the date the statement is taken from, as we mentioned earlier.
Your current balance is slightly different and will be displayed on your banking app or any online banking.
The current balance will be accurate to a few days (and sometimes will show pending transactions that have not yet left your account) and will show your transactions, charges, fees, or payments made.
Unlike your statement balance, there isn’t a set end date on this balance, and you won’t need to pay the entire amount.
For example, if your statement runs from the 1st to 31st of the month and you view your balance a few days later, any transactions or charges after this date won’t need to be paid until your next statement if you wish.
You can, of course, pay your entire balance if you wish and have the finances to do so. Paying the whole statement can avoid charges and help boost your credit score, but we will discuss more of this later!
Minimum monthly payment
Your minimum monthly payment is how much you need to pay on your statement. It will never be the full amount and allows you to pay your credit card affordably. You might be asked to pay $25 or $30 a month, but it’s worth noting that you will still incur interest charges.
You will need to pay the monthly payment on time to avoid any late charges.
Your remaining balance is the money left on the credit card that you can spend. We touched on this earlier, and you should see the number clearly on your banking app or any statement.
You will see the amount due and then the ‘remaining balance.’ You can still spend this amount, even when you owe money on your credit card, but do not go over this amount.
Going over the amount your credit card company has agreed to loan, you will incur extra charges and interest costs that you will need to pay.
As we mentioned earlier, there will be a date that you will need to pay the bill. Pay your credit card by this date to avoid incurring any late fees or charges for this.
But you might be wondering, how much do I need to pay? When you receive your statement, there will be the balance due and then the minimum payment we touched on earlier.
The minimum payment is all you need to pay, but be warned that you can incur extra charges! If your credit card is no longer interest-free, then you will be charged interest when you do not pay the full amount on your statement. How much interest you pay will be stated on your statement, so you can check this before making your payment.
If you can, pay the full amount in one go. It can help you boost your credit score and saves you money in the long run, as you aren’t paying expensive interest rates.
However, not everyone can do this. If you have a large amount of debt on your credit card and can’t pay it off in one go, look for a balance transfer. This allows you to transfer your debt to another card without a fee. Look for cards with zero or low-interest rates that can allow you to cut through your debt without incurring interest charges.
If you consider this, look on comparison sites for good deals on credit cards with fast response times!
And just like that, we have come to the end of our credit card balance journey today! As you can see, a credit card balance is how much you have spent and need to pay. There are a few different statements, but as you can see, once you break them down, they aren’t complicated or scary.
Remember not to leave any debt mount up and seek financial help and advice if you are in difficulty; you do not need to suffer alone.