What is Balance?
Definition of Balance
This is the total amount of money that you owe to the credit card company. Every time you buy something with your credit card, that amount gets added to your balance. Also, any fees or interest charges get added to your balance too.
So, imagine you start off owing nothing (a balance of $0), then you use your credit card to buy a new TV for $200. Now your credit card balance is $200. If you don't pay off that $200 before your next bill, the credit card company will usually add some interest charges to your balance, so you'll owe even more.
It's important to keep an eye on your credit card balance so you know how much you owe and can avoid spending more than you can afford to pay back.
3 things to know about Balance
1. Balances Can Grow - and Not Just From Spending: If you don't pay your full balance every month, not only will you have to pay off the amount you originally spent, but you'll also get charged interest on the remaining amount. This means your balance can grow even if you're not using your card, simply because of the accumulated interest.
2. Balance Transfers Can Help... Sometimes: Some credit cards offer "balance transfers", which means you can move your credit card balance from one card to another, usually to take advantage of lower interest rates. However, there's often a fee for this, so you need to work out if it will actually save you money.
3. It Affects Your Credit Score: A significant part of your credit score is determined by your credit utilization ratio, which is the percentage of your available credit that you're using. To calculate this, divide your total credit card balance by your total credit limit. If the number is high, it indicates you're using a large amount of your available credit, which can negatively impact your credit score. A lower credit utilization is generally better for your credit score.
Can I move my Balance to another card?
Yes, you can usually move your credit card balance from one card to another through a process called a balance transfer.
A balance transfer is when you take the amount of money you owe on one credit card (your credit card balance) and move it to another credit card. For a more detailed definition of a Balance Transfer visit its Glossary page
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