Understanding Credit Card Balance

Your credit card balance is a number that shows the amount of money you’ve spent on your credit card at a given time. Depending on how often you use your card, your balance may change from day to day, which will also impact your minimum repayment and your maximum spend limit.

Understanding your credit card balance and how it affects your finances is key. Here, we’ll cover everything you need to know about understanding your credit card balance and how to manage it over time. 

1. Definition of Credit Card Balance

Your credit card balance is the total amount of money that you owe your credit card provider at any given time.

Your balance will change with every transaction that you make. It is calculated based on a combination of factors, including purchases, interest charges, and fees.

2. Factors of a Credit Card Balance

The total balance of your credit card is affected by the purchases you make, the interest that you owe, and the fees that your card provider may charge:

• Purchases: This is the total amount that you spend during credit card transactions and is a summary of how much you have used your credit card.
• Interest charges: This details how much interest you owe, which is based on your outstanding balance which is not subject to any interest-free period.
• Fees: This includes any fees that your credit card provider charges, such as a card usage fee, any late payment fees if you miss your agreed payment date, and any other fees that may apply.

3. TSB Credit Cards and Balance Management

We’re here to help you monitor and manage your credit card balance, with TSB online banking, you can quickly log in and check your current balance so you have oversight on exactly how much you’ve spent.

We offer a variety of different credit cards with no annual fees, you can compare TSB credit cards and discover balance transfer cards, purchase cards, low interest, and credit cards for students.

To find out which option may be best for you, get in touch with our Money Confidence Experts.

4. Credit Limit and Its Impact on Balance

Credit card limit refers to the maximum amount that you can spend on your credit card. As you make purchases and build a balance on your card, the remaining amount you are able to spend will decrease.

As you repay your card and reduce your balance, your available spend will increase.

There may be certain circumstances where you exceed your credit limit and you may have to pay a fee to the provider when this occurs.

5. Interest Rates and Their Effect on Balance

The amount of interest that you pay on your credit card will depend on your APR rate and your billing cycle.

Your billing cycle is the schedule that you agree to when you take out your credit card. It informs when the card provider will log your balance for potential interest charges.

When you take out a credit card, you will also be opening an interest rate, which will apply to the balance that exists on your credit card at the end of your billing cycle.

If you only pay the minimum amount, you'll end up paying more in interest over time, and it will take longer to pay off your balance. Whenever possible, paying a little extra each month can make a significant difference.

Be sure to check the terms and conditions of your credit card agreement for a full understanding of your interest rate and how it applies to your credit card balance, and for information on charges around cash withdrawals.

6. Managing High Interest and Balance Transfers

If you have accrued a balance that has generated interest payments on your purchase card you may want to consider using a balance transfer credit card.

Balance transfer credit cards allow you to transfer the balance from your existing credit card onto a new one. It is important to know that additional fees will apply if any late payments are made. Most cards will charge a fee  for a balance transfer and this fee will be added onto your balance.

When transitioning to a balance transfer card, it’s recommended that you have a clear repayment plan in place to ensure you can pay off the existing balance before the low or zero-interest period ends. If you don’t, you may face a higher interest rate and additional fees that apply to the remaining balance on the card.

7. Statement Balance vs. Current Balance

When checking your credit card balance, there are two different figures you should be aware of—your statement balance and your current balance:

• Statement balance: This is the amount you owe at the end of your billing cycle, which your credit card provider has calculated based on your total purchase amount, interest, and fees.
• Current balance: This is your balance in real time, at any given point within your billing cycle. It reflects any purchases or returns that you may have made after your statement balance was calculated.

To avoid paying interest, you’ll need to pay your statement balance off by your repayment due date as outlined in your billing cycle.

8. Minimum Payment and Its Role in Balance Management

As part of your credit card agreement and your billing schedule, you’ll need to make repayments on your credit card balance by a set date each month.

Based on your total balance, you’ll be shown a minimum payment amount, which is what you need to repay to avoid fees.

While repaying the minimum will avoid incurring fees on your card, it’s good money management to pay more than the minimum if you can. Doing this will ensure you are working to reduce your overall balance every time you make a repayment.

9. Billing Cycle and Its Influence on Balance

The billing cycle is the schedule that allows you to manage your credit card balance and debt. It informs when you need make a repayment, so you know exactly when and how much you must pay to avoid incurring interest on your credit card.

You’ll get a credit card statement every 28-31 days, which will outline your statement balance, minimum repayment amount, and any details of any interest charges or fees incurred from the previous billing cycle (where applicable).

Your billing cycle allows you to organise your finances, so you can pay down your credit card balance and plan your spending based on your current situation and future goals.

10. Credit Utilisation and How it Affects Your Credit Score

Credit utilisation refers to how much of your allotted credit you are currently using. For example, if your credit card has a limit of £1,000 and you have a balance of £300, your credit utilisation is 30%.

Managing your credit utilisation is important for your overall financial health, including your credit score. Having a consistently high credit utilisation can lower your credit score, as it could be an indicator that you tend to rely on debt, so it’s advised to keep your utilisation low.

By making it a habit to pay down your credit card regularly so your credit utilisation is low, you can improve your credit score and maintain better control over your finances in general.

11. Key Takeaways for Managing Credit Card Balance

For a well managed credit card balance, it’s important to keep up with your billing cycle, check your balance regularly, and make your repayments on time.

Ensure you have a repayment plan in place to pay back your balance as much as possible and keep your interest to a minimum.

If you’re facing a high balance or interest rate, you may want to consider a balance transfer credit card that allows you to take advantage of a low or zero-interest period as you reduce your balance but remember that most balance transfer cards may charge a fee for transferring the balances.

Speak to one of our Money Confidence Experts today to learn about the different credit cards we have at TSB and to discover which option might be the best fit for you and your financial goals.

18+ and UK resident only. Lending is subject to approval. Credit limits, promotional periods and interest rates will vary based on your individual circumstances.

To remain eligible for promotional rates you must stay within your credit limit and make your payments on time each month.