Credit cards are not super complicated to understand, but you've just got to understand the basics so that they don't walk all over you with interest and fees.
I'm gonna cover the three main parts of credit cards; the billing cycle, the statement balance, and the outstanding balance.
Billing Cycle
let's get started. So right now I'll start with the billing cycle this is just the invoice cycle that keeps track of your spending for about a thirty day period, it typically runs for about a month and then it starts over again. I personally have my credit card billing statements start at the beginning of the month that way it doesn't complicate things, so if your billing cycle starts in the middle of the month call up your credit card company and have them change it to the beginning of the month so that all you have to worry about is about the 1st through the 30th.
Now once you've used your card and you've gone through the entire billing cycle you'll end the cycle with what's called your statement balance.
Statement Balance
A statement balance is just how much you owe from the billing cycle and at this point you'll be given a due date that's generally about 25 days after the billing cycle ended, as long as you pay off your statement balance in full by the due date you won't pay any interest on that credit card but if you don't pay off every penny from the statement balance then you will start to accrue interest.
So let's say the you owe $1,000 on your statement balance, well then you just need to pay that thousand dollars off by the due date and you won't be charged in the interest and you don't have to pay it all at once, you can do multiple payments throughout the due date period.
Just make sure to pay off that entire thousand dollars before the due date ends and you'll be just fine. Are you confused yet hopefully I'm making sense here.
Lastly is your outstanding balance
This is the accumulation of everything you owe on your credit card including the statement balance. All of the transactions from your grace period, statement balance, and everything, are inside of your outstanding balance. That's the amount you've got to pay off to owe zero on your credit card.
So let's say that you owe $1,000 on your statement balance but because it's not due for 25 days, you spend another $500 during that period. Well now your outstanding balance would be $1,500 because that's the total amount owed on everything.
Please don't get the outstanding balance and the statement balance confused.
You're only required to pay off the statement balance in order to not be charged interest. You can pay off your outstanding balance too if you want to, it's just not imperative like the statement balances.
Conclusion
Now that you understand the basics of credit cards just make sure to pay off your statement balance in full by the due date and you'll be just fine, and if you'd like to know how credit card interest works just read this article.
Interest is a bit more complicated so we'll leave that to another article
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