A balance is the total amount owed on a loan. However, with credit cards there are several different types of balances: current balance, statement balance or negative balance.
The current balance is the same as the outstanding balance. What does it mean and why is it important when you pay for your credit card?
What is a balance due?
It is the amount that remains unpaid on your credit card at the moment you view it. The outstanding balance on a credit card is the amount owed at the time you check your account.
The current balance is also known as a moving number. It can fluctuate daily. The outstanding balance will be $500 if you login to your credit card app at dawn, and a $50 credit appears on the account by midday.
To find out the latest amount you owe to the credit card company, look at your balance.
Are you ready for a credit card upgrade?
Sign up for a NerdWallet Account to get personalized suggestions for cards that are best for you.
How do you tell the difference between a balance outstanding and a balance on your statement?
The outstanding balance on your card is what you still owe, but the statement balance only shows you how much money you have owed since you closed the last cycle of billing, which usually takes around 30 days.
In most cases, your monthly statement for credit cards will list your current (or outstanding) balance as well as your statement balance. These two balances can be identical, but not if you make payments or use the card after your statement’s closing date.
Calculate your own statement balance:
-
Assume that the total amount is $3,000
-
Supposing that the total amount is $1,000, add up all of your payments and credits from this billing period.
-
Add the two amounts together. Statement balance is $2,000.
The statement balance and the outstanding balance will be equal if no transactions occur.
If you add additional transactions to your account after the billing cycle has ended, however, your balance on your statement will remain at $2,000 while your balance outstanding includes these additional transactions.
Is it worth paying the balance due?
If you have the money, paying off your outstanding balance can be a great option. You can avoid interest by paying the full amount due on your card.
When you pay your statement balance, the balance of your card will not reset to zero. Credit bureaus favor accounts that have a low credit utilization rate, which is the percent of available credit used at a given time. The experts recommend keeping your usage ratio under 30%. Your utilization rate for the credit card will drop to zero after you pay off any outstanding balance.
You won’t be charged interest for paying the entire balance of your statement. You will then be granted a grace-period, which allows you to “float”, or delay, any charges that you incur until your next due date.
Some issuers do not offer grace periods and may temporarily remove this perk from cardholders if they don’t settle their account by the due date.