What Is a Credit Card Balance?

Your credit card balance can refer to either your card’s current balance or its statement balance.

Current balance: This is the amount you see when you log in to your account or check your balance on a mobile app. It includes the most recent statement balance plus any additional transactions, such as purchases, payments, and fees.

Statement balance: This is the balance that appears on your card’s most recent statement. It represents a snapshot of your card’s current balance at the end of a billing cycle and determines your monthly minimum payment.

What Is a Credit Utilization Rate?

A credit card’s credit utilization ratio, or rate, is the percentage of the card’s credit limit that you’re using. For example, if a credit card has a $1,000 balance and a $5,000 limit, its utilization ratio is 20%.

To calculate the utilization ratio, divide the balance by the credit limit and multiply the result by 100 to get a percentage. In this case, 1,000 / 5,000 = 0.20, which then becomes 20%.

Why Your Credit Card Balance and Utilization Are Important

Your card’s balance and utilization are crucial because the balance represents what you owe, and the utilization can significantly impact your credit score.

If you’re carrying a credit card balance: Paying down the balance offers a double benefit. First, you’ll accrue less interest the faster you pay it off. Second, your credit score may increase as your balance drops.

If you pay your balance in full each month: You won’t accrue interest on your purchases. However, the statement balance is still reported to the credit bureaus, and you could have a high utilization rate. To lower your statement balance and the resulting utilization rate, you need to pay down the balance before the end of the billing cycle.

Monitor Your Balances and Utilization

You can monitor your credit card balances during the month to figure out what will be reported to the bureaus. If you’re trying to optimize your utilization rate to improve your credit score, you can try to add automatic payments to pay down your balance before the end of each statement. Or, set reminders for yourself to make payments before the end of each billing cycle.

Additionally, you can check your credit cards’ current utilization rates by checking your credit report for free from Experian. Your account also shows your overall utilization rate based on the balances and limits of all your revolving credit accounts, which can also be an important scoring factor. And you can get tips for improving your score and track your score over time for free.

Contact O1ne Mortgage for Expert Mortgage Services

At O1ne Mortgage, we understand the importance of managing your credit effectively. Whether you’re looking to buy a new home, refinance your existing mortgage, or need expert advice on managing your credit, we’re here to help. Call us today at 213-732-3074 for any mortgage service needs. Our team of experienced loan officers is ready to assist you in achieving your financial goals.