Q: When I first started using credit cards, I would pay the entire balance a day in advance so that it wouldn’t be late. But then I realized that if I continued to use my credit card later that day, it would create a balance that would roll over and get charged interest if I didn’t pay it off the next day. Right?

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I pay my balance in full every month, but even now when I pay it on the day it’s due, my account always tells me later that there’s a “balance last statement” of some random amount and I can’t figure out what that means. Thankfully my APR is 0% for the first year, but I’m worried about what it means for me in the future in terms of interest or late fees.

– Laura L.

To answer your first question: no, you will not be hit with interest charges, yet.

When you make that payment, you are paying for purchases made during the previous credit card billing cycle. The purchase that is made after the payment counts toward the current billing cycle and it’ll show up in your next statement. Pay off the statement balance and you won’t be subject to interest charges.

As for the second question, you’re most likely prepaying your account balance by manually selecting to pay the “current balance” instead of the “statement balance.” By paying the “current balance,” you’re paying off your last statement’s balance and a portion of the balance that accumulated since the last billing cycle ended.

Take this scenario for instance:

  • April 1: Billing cycle 1 begins (starting balance of $0).
  • April 2: Charge $500 in purchases.
  • April 20: Make $500 payment (“current balance”).
  • April 30: Charge $100 in purchases. Billing cycle 1 ends (ending balance of $100).
  • May 1: Billing cycle 2 begins. (starting balance of $100). Monthly statement is received for $100 balance.
  • May 2: Charge $500 in purchases.
  • May 20: Make $600 payment (“current balance”).
  • May 21: Statement balance for billing cycle 1 ($100) is due, but balance is already $0.
  • May 30: Charge $100 in purchases.
  • May 31: Billing cycle 2 ends (ending balance of $100).

Since you are already paying more than you have to, you won’t have worry about interest. If you want to continue to use this payment approach, there is nothing to really worry about. However, it would be much easier to keep track of the numbers if you set up automatic payments to pay off the “statement balance.”

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