What's a credit limit, statement balance and current balance on a credit card?

Credit Limit

It's the maximum amount you can carry on your credit card at any given time. If your credit limit is $2,000 and you have an unpaid balance of $500, then you will not be able to buy for more than $1,500 with the card. A credit limit is reusable. It means if you repay the $500, you will be able to buy for $2,000 again.

How is the credit limit calculated?

From the credit card issuer's perspective, the credit limit is the maximum amount they feel comfortable lending you. Credit card issuers usually your credit health to calculate your credit limit:

  • How much you make
  • How much you spend
  • How much you owe
  • Your repayment history
  • Your credit score

Can I change my credit limit after getting a credit card?

You can ask to increase or decrease your credit limit at any point after you receive your credit card. Credit card issuers will usually reduce the limit if you ask them to unless the amount is lower than their minimum acceptable credit limit. When you ask for a credit limit increase, your issuer will review your profile to assess how much they can increase your limit by (if any).

Can my issuer change my credit limit after approving it?

Your issuer can decrease your credit limit at any point without notifying you. Generally speaking, your issuer might reduce your limit if they feel that you cannot afford the initial credit limit anymore. They typically assess your limit by looking through your credit profile on an ongoing basis.

On the other hand, if you improve your credit health mentioned above, card issuers will usually reach out with credit limit increase offers. They cannot increase your limit without your approval.

Statement Balance

You will find a statement balance on your monthly credit card statement. Your statement balance is as of the date the statement was calculated.

Statement balance = credit card debt owed + unpaid interest + unpaid fees

How much of the statement balance should I repay?

Many credit card users make the mistake of assuming that they have 30 days after the statement date to repay the balance in full without incurring an interest charge. It's entirely false for the following reasons:

  • The grace period starts on the day of each purchase you make on your credit card.
  • The grace period is not necessarily 30 days. Many credit card companies have 21 days grace period.
  • The statement date does not mean anything when it comes to interest.

As a rule of thumb, repay all of your statement balance to be sure. If you see an interest amount on your statement, then you went past the grace period for some of the purchases already. Read more about the credit card interest and grace period here.

Current Balance

The current balance is the credit card balance we can access online or on our mobile app. It's updated almost instantly and usually includes all transactions.

Why is the current balance important?

Since the current balance is almost instant, it should be your most important and relevant balance to follow. With mobile apps and online bank access, there's no need to wait for a monthly statement anymore to review your transactions and your balance. When repaying your credit card debt, ensure to repay your current balance instead of the statement balance if you can. If your credit card issuer does not have online access, it's probably time to change your credit card!