You’ve likely been advised to pay your credit card balance in full and on time to boost your credit score. However, it can be confusing to understand the difference between your statement balance and your current balance. So, which one should you pay, and how can you avoid interest charges?

In simple terms, your statement balance is the total amount you owe at the end of a billing cycle, while your current balance reflects what you owe at any given moment. Understanding these differences can help you manage your payments effectively and improve your credit score.

What is a statement balance?

Your credit card statement balance represents the total amount you owe as of the last day of the billing cycle. This balance includes all purchases, interest charges, fees, and any unpaid balances accumulated during the billing cycle, which typically lasts between 28 and 31 days. You’ll find the statement balance detailed on your monthly credit card statement.

Remember that billing cycles don’t align with calendar months and can start and end on any day of the month.

What is a current balance?

Your current balance shows the total amount owed on your credit card at the exact moment you check it. This includes all recent purchases, interest charges, fees, and any unpaid balances. Unlike the statement balance, which is fixed at the end of a billing cycle, the current balance updates in real-time.

For instance, if you make a purchase after your statement balance was calculated, that amount will be reflected in your current balance but not in your statement balance. Your current balance can change frequently, even from day to day or minute to minute, based on your card activity.

Why is the statement balance different from the current balance?

It’s quite common for your current balance to exceed your statement balance. For instance, if your credit card statement dated July 31 shows a balance of $600, your payment won’t be due for at least 21 days, thanks to the Federal Credit CARD Act of 2009.

During this period, if you make a $75 purchase, such as buying a pair of shoes, your current balance will increase to $675. However, the statement balance remains at $600 until the next billing cycle, when the new purchase will be included.

Conversely, if you receive a refund after the billing cycle ends, your statement balance might be higher than your current balance. Typically, both balances will match if no transactions occur between billing cycles.

Should you pay your statement balance or current balance?

When deciding between paying your statement balance or your current balance, both options can help you avoid interest charges, so it’s mainly a matter of preference.

Pay the statement balance: This is the amount shown on your credit card statement, which includes charges from the last billing cycle. Paying this amount by the due date will ensure you don’t incur any interest on those purchases.

Pay the current balance: This includes the statement balance plus any additional charges made since the billing cycle ended. Paying the current balance will bring your balance to $0, which is beneficial but not necessary for avoiding interest.

Many credit card issuers offer autopay options, allowing you to set up automatic payments each month. You can choose to pay the minimum payment, a custom amount, or the full statement balance. Note that paying less than the full statement balance will result in interest charges.

What if you can’t pay the statement balance?

If you’re unable to pay the full statement or current balance, at least make the minimum payment to avoid late fees and damage to your credit score.

Paying only the minimum amount due means the remaining balance will begin to accrue interest. Over time, these interest charges can accumulate, potentially extending the time it takes to pay off your balance completely.

Ideally, you should aim to pay more than the minimum payment — preferably the full statement balance — each month if possible. This approach helps you save on interest, reduce your balance, and avoid accumulating debt.

How your balance impacts your credit score

Both your statement balance and current balance can impact your credit score. Credit card issuers report your activity—including balances and payments—to the three major credit bureaus at the end of each billing cycle.

If you pay off your statement balance within the grace period (between the end of the billing cycle and the due date), you can avoid interest charges. As long as you make at least the minimum payment during this time, your credit score won’t suffer from late payments.

Your credit utilization ratio, which is the ratio of your credit card balances to your credit limits, is a key factor in your credit score. For example, if you have a $2,000 balance and a $10,000 limit, your credit utilization ratio is 20 percent. This ratio accounts for 30 percent of your FICO® Score and about 20 percent of your VantageScore®—the lower, the better.

Consistently paying on time and in full can enhance your credit score over time, potentially leading to better credit cards, lower interest rates, and higher credit limits.

In Conclusion

Understanding how to read your credit card statements is crucial, including knowing the difference between your statement balance and current balance. Paying either balance in full can help you avoid interest charges. If you’re unable to pay the full amount, make at least the minimum payment to protect your credit score.

Choosing the right credit card can help you build credit and earn rewards, provided you use it responsibly. Explore today’s top credit cards to find one that suits your needs.