Credit card bill: Do I pay “minimum due,” “current balance” or “balance on last statement”?

It’s always a painful moment when you check your credit card bill at the end of the month and see a shockingly high balance. You spent how much? Who knew those plane tickets to a friend’s wedding, a few dinners out and those cool new shoes would set you back a thousand dollars, or more?

The shock of the high number, aka your “current balance” compared to your “minimum payment due” may scare you into paying the minimum, but that would be a mistake — because interest will keep accruing on the rest of your balance. Miss a payment and you’ll face a late fee of about $25 for a first offense. And if you don’t pay up for a few months, your credit score will take a hit of up to 110 points, Equifax notes.

We get it. Maybe you got so excited about the cash back or rewards on your card that you spent more than you planned just to get those bonus miles or a great rental car deal. But credit card mistakes can cost you money. That’s why it’s so important to be an informed consumer and make sure you know exactly what to do to use your credit cards in the smartest way possible.

Ideally, this means charging stuff on your card to get rewards each month, but then paying off the balance in full at the end of the month before you get hit with any interest charges. “Job number one for any credit card holder is to pay your balance off as soon as possible,” Matt Schulz, a senior industry analyst for CreditCards.com said via email. “The most important thing to know is that if you pay your statement balance in full and on time every single month, you won’t pay interest.”

When you go to pay off your balance, though, you may find something weird online. You’ll probably have two different balances listed: current balance and balance on last statement. And, when you make your payment, you may have to choose between which balance to pay. “Understanding the difference is important,” Schulz explained, “because it helps people make the most informed decision possible in regards to paying off their credit card balances.”

Current balance v. balance on last statement

When you see two different numbers for balance on last statement versus current balance, it means you used your card after your last statement closed.

“The ‘balance on your last statement’ is the amount that you owed when your most recent monthly billing cycle closed and your monthly card statement was generated,” Schulz said. For example, if your billing cycle runs from the first of the month to the 31st, it’s the amount of charges that processed on your account through the 31st of the month when your billing cycle closed.

Your “current balance,” on the other hand, takes into account not just the total charges in your last billing cycle but also charges you have made since the billing cycle came to an end as well as fees incurred and any payments you have made since your billing cycle ended.

So If your billing cycle goes from the July 1 to July 31 and you’re looking at the credit card statement on August 5, the current balance will include charges from July 1 through August 5. This means, as Schulz said, that your “current balance” is everything you owe right then, at the moment you’re looking on the site.

Which balance should you pay?

Schulz advises paying your current balance if you can, because that will get the total amount you owe down to $0.

If you can’t swing that, however, don’t worry. “It’s still good to pay off just your balance on your last statements. That would keep you from rolling any balance over from month to month and accruing interest,” Schulz said. While paying the balance on your last statement would mean you don’t pay interest, it doesn’t reduce your balance to $0 because you still owe charges and fees that have posted to your account since the last statement was generated.

Of course, if you pay off your “current balance” and then make a new charge the next day, you’ll once again owe money on your card, so it’s not practical to pay your current balance down if you’re going to keep charging stuff — unless you feel like signing in to your credit card and making small payments every day for the charges that posted that day, you’ll always have a “current balance.” But, the upside will be that you’ve already paid off some of your purchases rather than waiting until the end of the month to do so.

Ultimately, though, it’s up to you how you want to structure your payments. “There’s emotional satisfaction in getting your current balance down to $0,” Schulz said. “However, if you’re just trying to avoid paying any interest on your purchases, all you need to do is pay your statement balance in full on time every time.” If you can do that every month, you’ll be well on your way to a top credit score.

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