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Statement balance vs. Current balance these two terms are very important in the credit world, and everyone should know about them. Before comparing both of them, first, we have to know that what statement and current balance are.
What do you think?
Now, we are going to discuss the definition of the statement balance and the current balance; keep your eyes on the screen.
Suggested Read: Can You Use a Credit Card at ATM?
Statement Balance:
Statement balance shows that how much you owed at the end of your last billing cycle.
Current Balance:
The current balance tells about that how much you owe in total at any given moment.
Now, Do you understand what is statement balance is and what is current balance is?
I think, Yes!
Other words for statement balance and current balance are also here. Which are able to show the difference between both of them and will prove to be the key to information regarding statement balance and current balance. All your doubts regarding statement balance and current balance will clear soon.
So come to it.
Statement Balance: How It Occurs?
As long you have a credit account open, your activities will be divided into two monthly billing periods. Here you should note that the periods do not start from the first of any month. The exact dates are given by the organizations that issued your credit card. During the billing of each period, the transactions that occur will make your statement balance.
Once your billing period ends, your statement balance is locked, and the amount appears which you are responsible for paying within a certain time limit. When the billing period closing date is held, after that, you usually have a grace time of 21 days in which you have to pay your statement balance.
If you pay your statement balance during these days, you can save yourself from interest and late fee charges. To maintain a pure credit history, you have to adopt this routine and save yourself from additional charges (like interest and late fee charges, as I addressed above).
The remaining balance will be added to the following billing period’s statement balance. If you fail to pay off your full statement balance. But you have to make an effort as much as you can to prevent it because it means the unerasable mounting debts, high interest, and late charges.
Current Balance: How It Changes?
It is the most recently updated balance any time you see it. At any time a transaction occurs, it changes.
For Example: If your statement balance from the previous billing amount is $300. If you don’t make any payments or purchases, your current balance will also be $300. And if you make a purchase or paid $100 from your statement balance, your current account is $200. If you entirely paid off your statement balance and didn’t make any other payments and purchases, your statement balance and current balance will be $0. Your current balance is not supposed to pay it off until it is not completely paid off due to or not be a part of the statement balance. It is significant to keep your statement balance $0 and also keep your current balance $0 (it’s smart to work).
If you do that, your total line of available credit will free up and also keep your credit utilization level low. Although your current balance includes your recent payments and purchases, it can’t take into account pending payments and charges.
In short, it reflects the true amount of money you spent.
NOTE: The notable thing is that statement balance and current balance both are very important for credit history. Both should be kept as close to $0 as much as possible.
Avoiding Interest Charges in Statement Balance vs Current Balance:
Whenever you paid off your full settlement of each billing cycle before the deadline. Then you can easily avoid paying interest on your credit card bill. Now, you should know the significance of paying the statement balance on time means before the deadline.
But if you are not able to pay your full statement balance that at least pay your minimum payment. This may cause you to add interest but paying your minimum payment can save you from late fee charges and negative marks on your credit report.
Issuers don’t need to offer a grace period to credit card users. But if an issuer wants to offer it, it will offer at least 21 days from mailing or delivering a customer’s statements and will allow them to pay off your statement within an additional time period called grace period (good news is that) with no interest charge.
To Avoid Interest Charges Using Automatic Payments:
The authority of online billing and payment option has made it possible for credit card users to offer automatic payments to their customers. It’s mind-blowing, isn’t it?
Check from your credit card issuer that if autopay is available. If it is possible that so it is a very good opportunity for credit card users that you will be able to choose a statement balance.
Autopay helps you to stay on top of your bill, avoid late payments and also provide a safe side from interest on your purchases. It’s also a good idea to set reminders on your calendar before the due date to make sure that there are many funds are present in a bank account to process the payment.
Possibilities of Statement Balance vs. Current Balance:
Some transactions like cash advances are not falling under the rules of grace periods. Generally, grace period only offers for purchases; in the matter of cash advances, the moment you take on out, they start adding interest.
So, if you have recently taken out a cash advance, then pay it as soon as possible (just a bit of advice).
Is Your Credit Utilization Ratio Affected, If Yes Then HOW?
Your current balance affects your credit ratio. It depends upon a situation that how your credit card issuer reports your account balance to your consumer credit bureau. It’s not all in your hand.
The ratio of your credit utilization is simply that how much you used your provided credit card. We have a great guide about your credit utilization and how it affects your credit score. But now, we just give you a suggestion that the low utilization of credit is better for you instead of a high one.
Credit bureaus calculated the credit utilization balances which they received from credit issuers. Several issuers present statement balance reports of their customers. But it is not necessary for everyone that they sent only statement balances. If someone wants, so can be sent current balances instead of statement balances.
Though if you are in worry about this, ask for your credit card issuer and get information about which balance it reports to the credit bureaus. If your card issuer sent the current balance report instead of the statement balances report, then ask which day of the month it was sent.
If you are ever worried that your credit utilization is too high, comes toward the solution instead of worrying. Take a strong decision to pay your current balance as much as possible it proves a positive step towards a purely maintained credit report.
NOTE: A current balance below 30% of your total credit limit is the best target to set.
Last Words on Statement Balance vs. Current Balance:
When the question arises that should we pay our statement balances on time each month, without any doubt, if you do that, you will make a great step in a credit world, so you should prefer it.
As I addressed above that, it is a good thing that every time you pay your statement balances on time, but it comes on best when you also choose to current balances on time with statement balances.
By means of these steps, you can get rid of the interest charges and negative marks which spoil your credit report. Along with this, you will also drop down the ratio of your credit utilization which may help you to maintain your credit health. The fact is that you are asking a question is a sign that you take the credit seriously, and it indicates that you will surely make an effort to make credit history pure.
Credit card companies have begun to assist users with low credit limits. If you’re having trouble, get the Milestone Gold Card here.