Credit Card Balance
Candlefocus EditorWhen you use your credit card to make purchases or balance transfers, the amount of the purchase gets charged to your credit card balance. Foreign exchange transactions and yearly fees may also get added to your balance. Your balance can also increase due to interest charges and other fees such as late payment fees or over-limit fees.
When you make payments on your credit card, the amount you paid will get subtracted from your balance. If you do not make your minimum payment, your balance will remain the same from month to month, so more interest will be added to your balance.
It's important to remember that a credit card balance is not the same as a statement balance. A statement balance is the amount you owe on your credit card statement, which will usually include finance charges, fees, and other charges that have accrued since your last statement. Your statement balance is usually higher than your credit card balance is because it takes into account unpaid interest as well.
Having too high of a balance on your credit cards can negatively affect your overall credit score. This is because when the balances on your credit cards are higher, your credit utilization ratio increases; the higher your credit utilization ratio is, the lower your credit score will be.
It’s important to keep an eye on your credit card balance and make sure you are making timely payments in order to avoid any negative impacts to your credit. Paying off a large portion of your balance each month is the best way to minimize interest charges and reduce your credit utilization ratio, which will help to improve your credit score. Keeping your credit card balance low is one of the best ways to manage your finances and make sure your credit is in good standing.