Credit card balances are the amount you owe. This can change from one statement into the next, or even from one day to another depending on how you use your credit cards.
The different types of balances on credit cards can make it confusing to know what they mean. But it is important to understand the meaning of a credit balance and how it can affect your life.
Credit card balance – meaning, definition and explanation
A credit card balance refers to the amount you owe on your credit card at any given time. It is shown either on the credit card statement or an online account summary.
You can use your credit card account balance to keep track and manage all of your financial transactions. It is also important to pay your credit cards in full, on time, and without interest.
Logging into your account on the web or using your mobile app will allow you to check your credit card's balance. Your balance and minimum payment will be shown.
You owe the current balance at any time. This number may be higher than your statement balance, particularly if you have made purchases within the grace period of your credit card.
The current balance on each card can help you determine how much credit is available for your other cards if you have more than one. To maintain a good credit rating, you should keep the balances of each card below 30%.
Your current balance will also help you keep track of your credit use ratio. That is, the ratio of how much credit you're currently using to the total available credit. This ratio can have a negative impact on your credit score, particularly if it's above 30%.
When you exceed your maximum credit line or make a charge on your card, your credit balance will increase. The charge is added onto your credit card account and can be used to calculate the interest due on your next billing cycle.
When you pay your debts, the credit card balance will decrease. This makes it easier to maintain a high credit utilization rate and improve your credit score. It can also help you understand how much credit you have available to spend and when to apply for new credit or a credit limit increase.
It may be possible to transfer all or part of your balance from one credit card to another. This can help you save money and time. Most of the time, a balance transfer fee for credit cards is waived.
You may find it confusing to read your credit card statement, but by understanding it you can better manage your credit. The key is to learn how to budget, avoid interest and pay off your bill in full by the due date to avoid a lower credit score.