Understanding — And Paying Off —Your Credit Card Balance

The ideal credit card balance is zero — no money owed, no interest accruing. But with the cost of living as high as it is, a lot of us are carrying credit card debt from one month to the next.

While a credit card balance seems easy enough to understand, there might be a little more for you to know. Being fully informed about how credit balances work — and how to stay on top of yours — can make life as a credit card user less stressful and less expensive.

The simplest definition of a credit card balance is that it’s 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 credit card balance

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 includes purchases made during the billing period. Your statement balance could be less than your current balance, depending on the timing of your purchases.

For example, let’s say your current credit card 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.

If possible, it’s best to pay off your statement balance in full by the due date every billing cycle. That’s generally how you preserve your credit card’s grace period on new purchases.

If you only make the minimum payment, your card issuer will charge interest on the portion of the balance you don’t pay by the due date. Interest will continue to accrue on the unpaid balance until it’s paid off.

Credit card interest rates are typically much higher than many other forms of borrowing, which means your balance can increase quickly and become harder and harder to pay off. Even if you make regular minimum payments, carrying a large amount of credit card debt can still hurt your credit score by increasing your credit utilization ratio.

To protect — and even improve — your credit score, aim to pay off your credit card balance in full and on time every month. An overpaid credit card, or one with a negative balance, is generally less of a concern than carrying a high balance.

The easiest way to check your current credit card balance is through your online credit card account or app, which should show you some combination of:

If you have issues accessing your balance online, call the number on your credit card. A customer service representative should be able to help you access your online account. The phone menu may also have an option for you to check your credit card balance.

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

There are some good reasons to keep a close eye on your credit balance.

First, it helps you be mindful of your spending and the size of your credit card debt. Using a credit card makes spending money effortless; you don’t want to lose track of any purchases.

Second, monitoring your balance can help you protect yourself from fraud and errors. If your balance seems higher than it should be, check your transaction history to ensure your card hasn’t been used illegally or charged by mistake.

There are several signs that your credit card balance might be getting too high, including:

There are multiple ways to navigate the situation, though.

Pay what you can — when you can

If you can’t pay off your balance in full, the best option is to make smaller, additional credit card payments when you have the cash available. 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.

Take a look at your spending in a typical month and see what expenses can be reduced or eliminated. If putting off a weekly hang with your friends frees up $200, for example, the money saved could put a real dent in your outstanding balance.

Ask to reduce your credit limit

If your balance is too high, you might need to ask yourself why that is. Is it because prices are high and cash flow is tight? Or is it because you’re making unnecessary purchases you can’t afford to pay off?

If it’s the latter, you might benefit from asking your credit provider to lower your card’s credit limit. It’s one way to put a cap on your credit card use while you deal with your current balance.

This isn’t a perfect solution. Lowering your credit limit will likely increase your credit utilization ratio, which can lower your credit score. But if it allows you to pay down your balance faster, get out of credit card debt and reevaluate your spending habits, it could be worth it.

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.