What Is A Credit Card Balance?

Kevin Mwanza
Written by Kevin Mwanza
credit cards credit card balance
A credit card balance is a total amount that you owe to your credit card company or bank. This balance can affect your credit score. Image by Autumn Keiko

A credit card balance is basically the total amount that you owe to your credit card company or bank. That amount changes depending on how and when the card is used.

When you use your card to make a purchase, the balance increases. When you make a payment, the balance decreases. Any balance that remains at the end of the billing cycle is carried over to the next month’s bill.

Sometimes it may not be clear how a credit card issuer calculates this balance and some of the terms used may be difficult to understand.

Card issuers calculate the balance on your credit card by adding up any charges you make, along with accrued interest, late payments, foreign transaction fees, annual fees, cash advances, and balance transfers.

The balance changes from month to month based on the activity on the card, when it was paid and whether the payment was partial or in full.

To keep your account in good standing, a minimum monthly payment is usually required. This amount is typically listed on your statement.

Carrying a balance on your card does not help your credit score which is used by future creditors to determine whether you’re worthy to take out additional credit.

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Carrying a balance actually has the potential to hurt your credit score because it affects your card utilization rate — the amount of credit you’re using compared to the amount of credit you have available.

The higher your balance, the higher your utilization rate, which can hurt your credit score and have negative consequences in the future when you try to access additional credit.