Joseph received his billing statement in the mail and wanted to know how much to pay. The statement included both the amount due and the statement balance. Both amounts represent money that Joseph owed to his creditor, but he didn't know how much to pay. Revolving credit accounts and installment loans both send consumers billing statements which include both numbers on the statement. Understanding what each number means and how it applies provides the consumer with useful information regarding bill payment.
The statement balance represents the total amount the consumer owes to the creditor. This balance adjusts each month based on the transactions that occurred since the company printed the previous invoice. Consumers may pay the complete statement balance to bring the balance to zero and eliminate future payments, but this is not required. The statement balance on installment accounts continues to decrease as the consumer makes each payment. The statement balance on revolving accounts varies depending on whether consumers incur additional charges on the account.
The amount due represents the minimum payment the consumer needs to make. The creditor calculates this amount as a percentage of the total balance. The consumer needs to pay at least the amount due by the due date. As long as the consumer makes this payment on time, the account remains in good standing. The amount due will not pay off the account. Instead the statement balance minus any payments made plus any additional charges determine the new balance.
Accumulating Interest Charges
Most accounts accumulate interest charges on the outstanding balance. These interest charges add to the outstanding statement balance and increase the amount the consumer owes to the creditor. Consumers avoid paying interest charges by paying a higher amount of money with each payment. This reduces the outstanding balance and the applicable interest charges.
Avoiding Late Charges
When consumers make their payment after the due date, the creditor imposes a late charge on the account. This late charge increases the total amount owed by the consumer. Consumers avoid late charges by ensuring that the creditor receives their payment prior to the due date. Methods include making a payment by phone, online or by mailing the payment at least a week before the due date.