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Statement Balance vs Current Balance

Ever wondered what the difference is? Keep reading to find out.

08 November 2022Lloyd Smith 4 min read
Statement Balance vs Current Balance: What is the difference? New credit card users

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The main difference between statement balance and current balance is recency. A statement balance comprises the sum of all credit charges made to a credit card during a billing cycle, while a current balance includes the total money owed during the billing period plus any expenditures made up until the present date. This means that the current balance is almost always higher than the statement balance, however the statement balance is what needs to be paid off first, as that money has technically been owing longer.

Statement balances and current balances are simply organisational tools to keep you on track of your credit card balance, how much money you owe in total, and how much needs to be paid by a certain date to avoid interest charges.

While there are two different statements on your credit card statement, they simply reflect outstanding money owed to the credit card issuer cumulatively. Don’t worry, you do not have to pay them separately, and the money owed isn't the statement balance plus the current balance.

The statement balance and current balance reflect how much money you owed during a particular billing cycle and how much money has been spent since that period ended. For example, let's say your statement balance is $160, but your current balance is $240. This means that since your most recent credit card statement balance was generated, you spent another $80 using your credit card.

A statement balance is the amount of money you owed to the credit issuer last time a bill was generated. Because spending money is a continuous act, money lenders create a billing cycle which has well-defined dates for customers using their credit cards. When the last billing cycle ends, a statement balance is generated, allowing borrowers to see how much money they owe at the end of the particular billing cycle. This means that your statement balance will usually be lower than your current balance.

The current balance has a hint in the name: current. That is because it includes not only the money owed from the previous billing cycle’s statement balance, but also any charges that have been applied to your credit card since that statement balance was generated up until the present data.

In short, your current balance is the full balance owing on your credit card or credit account right now. Any money on your current balance will be included on your next billing cycle, and therefore, your next credit card bill. As such, the current balance will usually be higher than your statement balance.

Paying your statement balance should be your priority, as not doing so can cause late fees, defaults and even affect your credit score. There is somewhat of a misnomer that the statement balance and current balance are entirely different. They are not. They simply refer to the amount of money you owe, and as such, you will have to pay all of that money back to the lender eventually. However, it is essential that you pay your statement balance before the due date to avoid paying interest charges.

Of course, you will still have to pay off the current balance eventually, but not until it clicks over into your statement balance (which it inevitably will). It is highly recommended that you pay off your entire balance if you have the means to do so. You’re going to have to pay the entire balance off eventually anyway, so if you can bring the balance to zero, you should. If money is a little tight, or you’re waiting for a paycheque, focus on paying off the statement balance to avoid interest charges.

Amounts owed definitely impact your credit score, however this is generally because of something called a debt-to-credit ratio. Debt-to-credit ratio is determined by adding up your gross monthly debt payments (after tax) and dividing them by your gross monthly income, with higher debt-to income ratios being looked upon as less favourable. This ratio assists lenders in assessing how credit-worthy you are, how likely they are to loan to you or bolster your credit card cap, and at what rates.

But what does this mean for you? If you are consistently paying off your statement balance in a timely manner during the grace period and before the due date, it is unlikely that your credit score will be impacted. Once you begin applying for more loans, opening more lines of credit and adding to your gross monthly debt payments, your credit score may be affected if you cannot keep up with the repayments. This is determined by credit bureaus and credit card issuers.

A simple way to chip away at your current balance is by employing debt consolidation, which reins in outstanding balances across a number of accounts to make them more manageable. If you are considering this course of action, make sure you understand the ins and outs of debt transfer before you action it.

The main takeaway is that you should not be alarmed that there are two statements on your credit account. Your statement balance encompasses the amount of money you owe for a particular billing cycle, while your current balance refers to the total amount of money owed (including the statement balance plus expenditures made after the billing cycle) up to the present date.

You do not have to worry too much about the current balance, as chipping away at the statement balance will simultaneously chip away at the current balance, however, must ensure that you repay the statement balance at the time designated by your creditor to avoid incurring high interest rates and late fees.

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Written by Lloyd Smith

General Manager AU

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