Understanding Your Credit Card Balance

A credit card can be a handy tool to use in your daily life and as you work toward financial goals. But credit cards also come with many responsibilities and can sometimes lead to problems.

To avoid credit card debt and to establish and help you maintain a good credit score, it’s important to understand and stay on top of your credit card balance.

What is a credit card balance?

A credit card balance is the amount of money you owe a credit card issuer. However, it’s a little more complicated in practice, as the term often describes two different amounts: your current credit card balance and your credit card statement balance.

Current balance on a credit card

The current balance on your credit card is the amount you owe at a given time. It’s the total credit you’ve used or the amount you’ve spent using the card without considering your payment schedule.

Credit card statement balance

The statement balance is the amount listed on your monthly credit card bill and affects your credit card grace period. Your statement balance could be less than your current balance, depending on the timing of your purchases compared to the billing cycle dates.

For example, say your current balance is $500. But because you made some purchases after the cut-off date for your billing cycle, your statement balance for this month is only $380. This means the remaining $120 will appear on your next credit card statement.

When to pay your credit card balance

It’s a good idea to pay off your statement balance in full at the end of every billing cycle.

If you only make the minimum payment, your card issuer will charge you interest on the portion of the balance you don’t pay off by the due date. The company will continue to charge interest until the amount, including the additional interest, is paid back in full.

Credit card interest rates are quite high, often around 20%, which means your balance can increase quickly and become harder and harder to pay off. In addition, carrying credit card debt can also harm your credit score.

To protect — and even improve — your credit score, aim to pay off your credit card balance in full and on time every month. It’s good to watch how much of your credit card limit you’re using, which is known as your utilization. Many financial experts recommend keeping your credit utilization at less than 35% of your available credit to maintain a good credit score.

An overpaid credit card, one with a negative balance, will not have a negative impact on your credit score.

» MORE: How to calculate credit card interest

How to check your credit card balance

The easiest way to check your credit card balance is through your online credit card account. Log in with your account name and password to your online bank or credit card provider’s website.

Every issuer’s site is different, but most should easily show your:

If you have any trouble, call the number on your credit card. A customer service representative can likely help you access your online account. The phone menu will also likely have an option for you to check your credit card balance.

Finally, if you receive paper statements in the mail, they will list your credit card balance.

It’s a good idea to keep a close eye on your credit balance and be mindful of how much you’re spending. Aim to pay off your balance in full each month. You can even make more frequent payments if you want to keep your utilization lower and have extra room in an emergency. Plus, regularly checking your credit card activity helps you notice and report any mistakes or possible credit card fraud.

What to do if your credit card balance is too high

If you notice your credit card balance creeping closer to your credit limit, it’s time to take action and pay off your credit card.

Ask to increase your limit

Spending most or all of your available credit every month — even if you pay off your balances — can damage your scores. If you’re making balances in full and on time, but still hit your limit every month, you may need to ask your card issuer to increase the credit limit on your card. However, if overspending is a problem for you, a higher credit limit may not be a good idea.

Pay your credit card bill

The best option is to make a payment. It can be a full or partial payment to help reduce your utilization until you can pay off the rest. You don’t need to wait for your monthly statement to arrive — sometimes, making a payment early is the best time to pay your credit card bill.

Switch to a low-interest credit card

A low-interest credit card will charge you a lower interest rate compared to most other types of credit cards. The lower rate can have a significant impact on your budget as you’ll be paying fewer fees.

In addition, many low-interest credit cards have a balance transfer option that allows you to port your balance from an existing card.

Use a balance transfer credit card

If you’re facing a growing credit card balance and don’t have enough money to pay it off, you could consider getting a balance transfer credit card. These cards charge significantly lower interest rates (sometimes even 0% for a promotional period), keeping your credit card debt from growing while you work to pay it off.

Consolidate your credit card debt

If you have a lot of credit card debt and a balance transfer card doesn’t work for you, another option is to consider consolidating your credit card debt. Debt consolidation involves combining all your debts, such as several credit cards, into a single debt, so you only have to worry about one payment and one interest rate. This is done through a loan or a line of credit.

Interest rates for debt consolidation loans depend on your financial situation, but they tend to be lower than those of traditional credit cards.