What Is A Closing Balance? 

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The closing balance is the amount of debt or money that you owe on your credit or debit card by the end of the statement period, which is typically every 30 to 31 days, depending on the month. Your closing balance then becomes your opening balance for the next month. 

So, why is it important to know your closing balance? And what does it really mean? Let’s find out. 

How closing balances work

Your closing balance is the amount that is owed on your credit card or the remaining balance in your account for a bank account at the end of the billing cycle. Similar to your credit card, loans also have a closing balance. 

Keep in mind that billing cycles do not necessarily run until the end of the month. Your billing cycle can fall in the beginning or middle of the month, depending on your financial institution. Still, the date will be the same each month.  

Your closing balance on your credit card will be determined by your charges as well as the interest you have accrued, minus any payments you have made towards the balance. The closing balance on your checking account is calculated similarly, where debit minus credits and any associated fees results in the total balance.

Do I pay the opening balance or closing balance?

Your opening balance can be the same as your closing balance from the previous month. Your closing balance is the opening balance minus any payments you made within that statement period, plus any additional charges. 

For example, if you have a $0 opening balance, you likely paid off your credit card while also refraining from using it at all during the previous billing cycle. Therefore, you will want to look at the closing balance when deciding how much you will pay, particularly if you’re planning to pay off your credit entirely. 

Closing balance vs minimum payment

The closing balance is your total balance after all of your debits and credits are taken into consideration at the end of the statement period, but what is your minimum payment? Well, your closing balance will help you determine your minimum payment for the new billing cycle. 

If you pay your balance off completely, then that makes everything easier because there will not be a minimum payment to determine because you do not have a balance. However, let’s say you do have a balance. 

Your minimum payment will be based on your interest rate as well as how much you owe, which is known as your balance. Most creditors have a minimum payment amount, but if your balance is less than the minimum, which is typically $25, you will likely have to pay the total balance.  

Why you should pay the full balance on your credit card

Now that you have a better understanding of what closing balance means and how it plays a role in determining your payments for each billing cycle, let’s take a look at how you can use this information to pay off your credit card. 

You’ll avoid late fees

Paying your credit card in full will help you avoid late fees. Your due date is usually a few days after you receive your monthly statement. So, why not use that information to pay off your card in full? That way, you can avoid missing your payment date and worrying about late fees.  

You’ll avoid interest charges

Most credit cards charge an interest rate on all purchases. However, paying your card off every 30 to 31 days is a surefire way to avoid interest charges. When you pay your closing balance every billing cycle, you will save money in the long run. 

Your credit score will stay in good shape

Paying your credit card off in full can help keep your credit score in good standing. A good payment history and a low credit utilization ratio are two factors that lenders consider when determining your credit score. Paying your card off every month will positively impact both factors.  

You’ll spend smarter

Making a budget is a great way to manage your money and spend smarter. For example, if you plan to pay your credit card off each billing cycle, that payment will be included in your budget, which is likely going to encourage you to stick to your budget. Being mindful of the need to pay your balance off every 30 days or so will also help you reconsider unnecessary or impulsive spending. 

The importance of closing balances 

Your closing balance means how much money you owe at the end of every billing cycle after payments, interest and purchases are calculated. You can use your closing balance to help you figure out how much to pay every 30 to 31 days. 

Paying your credit card off each month is excellent when it comes to your credit score, budget and overall finances. Consider it a great way to stay on top of your finances on a consistent basis.  


What happens if you pay the entire amount owed on a credit card by the due date?

Paying the entire amount owed on a credit card can improve your credit score.

What is the difference between closing balance and available balance?

The closing balance is the total amount you owe on your credit card after you make payments and accrue interest. Your available balance is how much credit you use.

What is the opening balance on a loan?

The opening balance on a loan is the initial amount of the loan or the principal amount. The loan amount could change over time depending on interest and fees.

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