How to Pay Your Credit Card the Right Way

Pay Your Credit Card the Right Way

You’ve probably looked at your statement before and wondered, what exactly is the minimum balance, the statement balance, and the current balance? And you’ve probably also wondered, which one should I pay and how will it affect me? You’ve probably especially had these questions if you’re new to credit cards.

What are the Different Balances on Your Credit Card Statement?

Your billing statement will also include information such as your beginning balance – the amount that was carried over from the previous month – any transactions you made, any payments you made, any credits from items returned, and all fees that you have encountered during the current billing cycle. You will see three different types of balances on your credit card.

What is the Minimum Balance?

The minimum balance, which is also sometimes called the minimum payment amount, is the minimum payment your credit card issuer will accept for that billing cycle to keep your account in good standing.  If you don’t at least make the minimum payment, you will likely be assessed a late fee or a penalty interest charge.

What is the Statement Balance?

Your statement balance is the total of all of your charges during the previous billing plus any outstanding balance you had that was carried over from previous months. When you pay the statement balance, it is considered paying in full even though you may still have a little bit of a balance.

What is the Current Balance?

The current balance is made up of your statement balance and any purchases you have made since your billing cycle ended. It is the most up-to-date balance on your credit card.

How to Pay Your Credit Card the Right Way

You should always pay the statement balance and you should wait until the due date to pay it. The reason is because you actually save money by paying the statement balance and waiting until the last minute to pay it due to the interest your money earns while it sits in your savings account, especially if you have a high-yield savings account.

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