When used responsibly, credit cards are one of the most useful tools out there. While most people understand how credit cards work, knowing how to read your credit card statement isn’t always so simple. If you’ve ever found yourself confused about the differences between your statement balance and your current balance, you’re not alone.
Knowing the differences between the two is essential, as it can affect your credit limit, spending habits, your budget, and how you pay your bills. Once you understand how the balances differ, you can take control of your credit cards and make smarter financial decisions.
What is the current balance on credit card statements?
A current balance on credit card statements is the total amount of charges you currently have on your credit card. This amount could include your statement balance and any additional charges.
Your current balance would update whenever you make any debits or credits. For example, if you were to make a payment, your current balance would be decreased by an equal amount. On the other hand, if you were to make another purchase, that transaction would be added to your current balance.
It’s worth noting that pending transactions do not get included in your current balance. They only get added when the transaction is processed, which may take a few days.
What Is a statement balance?
A statement balance is the amount you owe for your billing cycle. Generally speaking, credit cards in Canada have a billing cycle of around 30 days. Every transaction that gets posted within that cycle would be added up to calculate your statement balance.
Generally, your billing cycle usually won’t align perfectly with the 1st or 30th of each month. That said, some credit card providers allow you to change your billing cycle. You would just need to call them to request that change.
Although every credit card comes with at least a 21-day interest-free period, you must pay your entire statement balance to avoid interest charges. If you make just the minimum balance or a partial payment, interest charges on your purchases would apply.
Why is my statement balance more than my current balance?
When comparing your credit card statement balance vs. current balance, it’s possible that your statement balance is more than your current balance. That’s because your current balance will always reflect any credit and debits to your account, whereas your statement balance is for a set period of time.
For example, let’s say your billing cycle ends, and you have a statement balance of $1,000. During the next few days, you make $200 in purchases. Your current balance would now be $1,200, while your statement balance remains at $1,000.
Now let’s say you pay off your entire statement balance. Your current balance would be $200, while your statement balance remains at $1,000. Again, since your statement is for a set period, that amount wouldn’t change. The only time it would change is when your next billing period has ended, and your new statement balance is available.
Why is my current balance different from statement balance?
Remember, your current balance is your statement balance, plus any new transactions. Think of your current balance as your statement balance plus any debits or credits to your account. While there will be times that your statement balance will be the same as your current balance, more often than not, they’ll be different.
How to read your credit card statement
When your billing cycle has ended, your credit card provider will send you a paper statement or alert you that your statement is ready electronically. On that statement, there will be a section that lists your statement balance, minimum balance, and due date.
If you want to find out your current balance, you’d have to log into your online banking. Under your credit card profile, you can see any additional charges that have been made since your statement balance was posted. That would be your current balance.
In the same section, you’ll see pending transactions. However, those transactions will usually say pending beside it and will not be added to your current balance until the transactions have been completed.
When should I pay my statement balance?
You’ll always want to pay your statement balance before your due date. By doing this, you’ll avoid interest charges as long as you’re paying the entire balance. That said, try to make your payment at least three days before your statement due date, as it could take a few days for the funds to clear. Once your payment has been cleared, you’ll see your current balance decrease.
Should I pay the statement balance or current balance?
Deciding between paying the statement balance or the current balance is a personal opinion and has more to do with one’s goals and financial situation. Generally, you’ll want to pay at least the full statement balance before your due date so you can avoid any interest charges.
Now let’s say you made a late or partial payment. The interest charges would appear on your next statement balance. If you continue to only make partial payments, more interest will be added. This can become a debt trap that can be difficult to climb out of.
While it’s understandable that you may not be able to pay your entire statement balance each month, it’s important to recognize the consequences.
Alternatively, you could always choose to pay the current balance. By doing this you would lower your overall debt load. Keep in mind that if you go this route, you still need to pay attention to your statement balance to avoid any interest charges.
For example, let’s say your current balance is $1,200, and you make a full payment. You make a purchase later that day for $25, and your statement balance arrives a few days later. Since you paid the current balance a few days earlier, you think you’re good. However, if that $25 purchase fell within your billing cycle, you would need to remember to pay that amount too. In other words, make sure that any payments you make, regardless of when you did it, add up to at least the statement balance every month.
Why did I pay my statement balance, but it's still there?
Regardless of how you pay your statement balance, the funds don’t always post immediately. It typically takes a few business days to clear. For example, if you made a payment on Monday, it may not get posted until Wednesday or Thursday. Alternatively, if you paid on a Friday, it might not end up in your account until Tuesday or Wednesday since transactions won’t post over the weekend. Once your payment has cleared, your current balance will decrease.
Even though interest will be charged immediately if you make a late payment, your credit card provider does have some leeway to credit you those charges back. Just call them up and let them know that the payment was made late by accident. If your payment history shows that you typically pay on time and in full, they’ll likely waive those interest charges.
Why do I have a negative current balance?
A negative balance means your account currently has a credit. This happens when you’ve overpaid your current balance, or you made a return that has a greater value than your current balance. When you make another purchase, the new transaction would be offset by your negative balance.
The bottom line
Your credit card statement balance and current balance are two different things. Which one you decide to pay at the end of your billing cycle is entirely up to you. Paying your statement balance will keep your finances organized. However, if you opt to go with the current balance you can keep your balance low and increase your cash flow.
Barry Choi is a personal finance expert based in Toronto who makes frequent media appearances. His website Money We Have is one of Canada's most trusted sources for all things related to money and travel.