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A credit card balance is the total amount of money you owe on your account. However, you may not know exactly how card issuers calculate what you owe or whether it's good to carry a balance.
Below, Selectexplains how a credit card balance works, so you can familiarize yourself with this important term on your bill.
What is a credit card balance?
- How is a credit card balance calculated?
- Is it good to carry a balance on a credit card?
- What's the difference between a credit card balance and statement balance?
- Where can I find my credit card balance?
How is a credit card balance calculated?
Card issuers calculate your credit card balance by adding up any charges you make, along with accrued interest, late payments, foreign transaction fees, annual fees, cash advances and balance transfers.
Credit card balances also reflect any payments or statement credits made to your account. Your balance can change from month to month depending on whether you pay your bill in full and on time.
Is it good to carry a balance on a credit card?
No, perhaps one of the biggest credit card myths is that it's good to carry a balance on a credit card. Carrying a balance on your credit card doesn't help your credit score, it only has the potential to hurt it.
Lingering balances on your account directly affect your credit card utilization rate. This is the amount of credit you're using compared to the amount of credit you have available. The higher your credit card balance, the higher your utilization rate, which can hurt your credit score.
If you carry a balance on your credit card, you'll also have to pay interest charges (unless you have a card with an introductory 0% APR on new purchases). It's a waste of money to pay interest on your balance if you can afford to pay off your credit card bill in full each month.
If you're already carrying a balance on a credit card, consider transferring it to a balance transfer credit card, such as the Discover it® Balance Transfer. This can help you save money in the long run, if you commit to paying off your balance during the introductory 0% APR period for 18 months (17.24% to 28.24% variable APR thereafter). There's a 3% intro balance transfer fee, up to 5% fee on future balance transfers.
What's the difference between a current balance and a statement balance?
When you receive your bill, there will be two balances listed: current balance and statement balance. A current balance is the total amount of money you currently owe on your credit card. Meanwhile, a statement balance is made up of all the charges you made during the last billing cycle. This doesn't include any pending charges or purchases made after your billing cycle ended.
Where can I find my credit card balance?
There are several ways to find your credit card balance. The simplest way is to log into your account online or via your card issuer's mobile app. Your current balance and statement balance will also be shown on your bill along with the required minimum payment. You can also call customer service.
Information about the Discover it® Balance Transfer has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
For rates and fees of the Discover it® Balance Transfer, click here.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
A credit card balance is the amount of credit you've used on your card, which includes charges made, balances transferred and cash advances (like ATM withdrawals). You can think of it as the amount of money owed back to the credit card issuer. If you don't owe a balance, it will appear as zero.
What is a reasonable credit card balance? ›
You want to maintain less than a 30 percent balance on each card and overall.
What should be the minimum balance in credit card? ›
Let's consider a small example for clarity. Suppose you have a Credit Card with an outstanding balance of ₹20,000. Your Credit Card company requires a Credit Card minimum payment of 5% of the outstanding balance. So, your minimum due would be 5% of ₹20,000, which amounts to ₹1,000.
How do you explain credit balance? ›
Essentially, a “credit balance” refers to an amount that a business owes to a customer. It's when a customer has paid you more than the current invoice stipulates. You can locate credit balances on the right side of a subsidiary ledger account or a general ledger account.
What is an example of a credit balance? ›
Examples. Bank Account: If your checking account shows a credit balance of $5,000, it means you have $5,000 available to spend or withdraw. Credit Card: If your credit card statement shows a credit balance of $100, you have a positive balance of $100.
What is credit card balance and limit? ›
A quick summary. Your credit limit is the maximum amount of money, in total, you can borrow on your credit card at any one time. An initial amount is set by your provider when you apply for your card, but this can change over time. It's usually based on your individual circ*mstances and credit score.
What is a good credit card balance to keep? ›
A general rule of thumb is to keep your credit utilization ratio below 30%. And if you really want to be an overachiever, aim for 10%. According to Experian, people who keep their credit utilization under 10% for each of their cards also tend to have exceptional credit scores (a FICO® Score☉ of 800 or higher).
Is $20,000 in credit card debt a lot? ›
High-interest credit card debt can devastate even the most thought-out financial plan. U.S. consumers carry $6,501 in credit card debt on average, according to Experian data, but if your balance is much higher—say, $20,000 or beyond—you may feel hopeless.
Is $6,000 in credit card debt a lot? ›
The Average Credit Card Balance is Over $6,000.
What is a good credit balance? ›
While many credit experts recommend keeping your credit utilization ratio below 30% to avoid a significant dip in your credit score, the 30% rule should be considered the maximum limit, not your ultimate goal. In reality, the best credit utilization ratio is 0% (meaning you pay your monthly revolving balances off).
If you're just starting out, a good credit limit for your first card might be around $1,000. If you have built up a solid credit history, a steady income and a good credit score, your credit limit may increase to $5,000 or $10,000 or more — plenty of credit to ensure you can purchase big ticket items.
Should I pay off my credit card in full or leave a small balance? ›
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
What are normal credit balances? ›
Normal Balance of an Account
As assets and expenses increase on the debit side, their normal balance is a debit. Dividends paid to shareholders also have a normal balance that is a debit entry. Since liabilities, equity (such as common stock), and revenues increase with a credit, their “normal” balance is a credit.
Does a credit balance mean I owe money? ›
A credit might also be added when you return something you bought with your credit card, when you earn a reward, or when a mistake in a prior bill is corrected. If the total of your credits exceeds the amount you owe, your statement shows a credit balance. This is money the credit card company owes you.
What is a short credit balance? ›
Short Credit/Short Debit. A Short Credit is the amount of money held aside to close short positions in an account. This value is compared against the market value of securities held short, and is marked to market weekly.
Why does my credit card say I have a balance? ›
Your statement balance is the total owed, based on adding all charges and payments, at the end of a billing cycle. Your current balance includes new purchases and other activity that may have occurred since the previous billing cycle ended.
Is credit card balance positive or negative? ›
When you use your credit card to make a purchase, the total amount borrowed will appear as a positive balance on your credit card statement. A negative balance, on the other hand, will show up as a credit. A minus sign will appear before the number of your current balance.
Is it better to have a balance or no balance on credit card? ›
If you have a credit card balance, it's typically best to pay it off in full if you can. Carrying a balance can lead to expensive interest charges and growing debt. Plus, using more than 30% of your credit line is likely to have a negative effect on your credit scores.
