Credit card statement balance vs current balance: which to pay?

When you receive your credit card bill, you'll notice two different balances: the statement balance and the current balance.

Conventional wisdom says that you should always pay off your statement balance within your grace period to avoid paying interest, but in contrast, we hear very little about the current balance.

If your goal is to understand your billing cycle better and learn more about how your credit utilization rate affects your credit score, it's helpful to break down exactly how the two amounts differ.

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Both statement and current balances operate around a billing cycle. A billing cycle is the length of time, typically 28 to 31 days, between your last statement closing date and the next.

Statement balance

A statement balance is the sum of your transactions from your last billing cycle, plus and fees or interest. This is generated on the last day of your billing cycle and will include your minimum required payment and due date. Since it's looking at a specific period of past spending, your statement balance doesn't change until the end of the next billing cycle, when you will get a new statement.

You must pay your statement balance in full before the due date to avoid any interest fees.

Current balance

The current balance is a running tracker of how much you owe on your card at any given time. This means that, unlike a statement balance, it will change depending on your spending.

For example, let's say you spent $500 during a billing cycle, and another $50 after your cycle ends. When you receive your credit card statement, your statement balance will be listed as $500. And if you check your online account, your current balance will be $550. Then, if you make a $500 payment, your statement balance will be paid off, leaving you with a $50 current balance.

Credit card issuers typically report your statement balance to the credit bureaus monthly, but if you have multiple cards with different issuers, you'll likely have credit card balances reported at various times throughout the month. While most card issuers report your statement balance instead of your current balance, you should double-check by calling or messaging your card issuer about which balance they report.

The balance reported to the credit bureaus appears on your credit report and can affect your credit utilization rate, which is the percentage of the total credit you're using. The higher your balance, the higher your credit utilization rate, which can lower your credit score.

There are a number of credit monitoring services that make it easy to track your credit report. Experian IdentityWorks offers a basic plan at no cost, plus free trials for its premium options. The free plan offers some basic credit monitoring tools and alerts, while the paid plans include features like identity theft insurance and fraud resolution support.

To find your credit utilization rate, a significant credit score factor, divide your total balance by your credit limit. For example, if you have one credit card with a $1,000 balance and $5,000 credit limit, your utilization would be 20%.

To maintain a low credit utilization rate, consider reducing your spending or making periodic bill payments throughout your billing cycle so you have a lower statement balance. The lower your statement balance, the lower your credit utilization rate, which can improve your credit score.

To have your account reported as current to the major credit bureaus (Experian, Equifax and TransUnion) and avoid late fees, you'll need to make at least the minimum payment on your account. But to avoid interest charges, you'll need to pay your statement balance in full.

If you pay less than the statement balance, your account will still be in good standing, but you will incur interest charges. You can avoid paying interest temporarily with an intro 0% APR card, like the Wells Fargo Active Cash^® Card or the Citi Simplicity® Card. The Wells Fargo Active Cash has a 0% intro APR for 12 months from account opening on purchases and qualifying balance transfers. 18.49%, 24.49%, or 28.49% variable APR thereafter; balance transfers made within 120 days qualify for the intro rate and fee of 3% then a BT fee of up to 5%, min: $5 and the Simplicity Card offers a 0% intro APR for 18 months on balance transfers from date of account opening (after that, the variable APR will be 17.49% - 28.24%, based on your creditworthiness. Balance transfers must be completed within 4 months of account opening; see rates and fees). There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).

Whether you pay the statement balance off in full or only pay the minimum, you can set up autopay to ensure you don't miss a payment or hurt your credit score.

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