
Get exclusive money-saving offers and guides
Straight to your inbox
Updated
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
When you get your credit card statement, you will see the account's closing balance, the date that a payment is due and the minimum amount you need to pay by that date (among other details). The closing balance on your credit card statement is the total amount owed, or what's left for you to pay off based on all the transactions and payments you have made during that statement period.
If you can afford to pay off your card's closing balance in full by the due date on your statement, you will save on interest charges – especially if you have a card that offers interest-free days on purchases. Plus, paying off your credit card could help improve your credit score by adding positive details to your payment history. Let's take a closer look at how it works in this guide.
Credit card interest is typically calculated daily, based on your balance at the end of that day, and then charged to your account each month (at the end of your statement period). This means any payment you make will reduce your balance and the amount of interest that accrues on it. And when you pay your card's closing balance in full by the due date on your statement, none of those transactions will be carried over to the new statement period. You could think of it as a way of wiping the slate clean each month.
Paying off your entire credit card balance also gives you a way to avoid interest charges completely if you have a card that offers interest-free days on purchases (and plenty do). With interest-free days, the purchases you make between the start and end of your statement period will not be charged interest, as long as you pay off your full balance by the due date on your statement. If you want to learn more about how interest-free days work, this Finder guide breaks it down in detail.
Your credit score is based on the details listed on your credit file, including your repayment history for credit cards, loans and other credit products. Paying off your credit card (and other accounts) on time helps build up good credit history, which can also help you improve your credit score.
On the flipside, if you have late payments or defaults on your credit history, it will have a negative impact on your credit score. One important detail to be aware of with your credit card is that you only need to pay the minimum amount by the due date on your statement to meet the repayment requirements. But if you can pay more, you should do that to help reduce or avoid interest charges.
Get your credit score and comprehensive report now!
The minimum repayment is what you must pay back each month and it is usually 2-3% of the total account balance. Paying this will help you avoid late payment fees and bad credit history. But if you only pay the minimum amount, you will be charged interest on the balance of your account. To avoid interest, you can pay the full amount owing, which is based on how many purchases you have made on the card during the statement cycle.
As an example, let’s say you spent $2,000 on a credit card with a minimum payment of 3%. The minimum you would have to pay off your statement by the due date would be $60. But the remaining $1,940 would attract interest until you paid it all off. So if you wanted to avoid interest charges, you would have to pay off the full $2,000 by the due date on the statement. It is recommended that you pay as much of your outstanding balance as you can each month. It can take years to clear your balance by only paying the minimum amount and in some cases you may never be able to pay off your card.
As a general guide, if you can afford to pay your credit card balance in full each month, then it will save you money and give you the option of making interest-free purchases. But if it's not possible to pay off the entire balance, choose an amount that is affordable – even if it's only the minimum amount required. Then aim to clear the rest when you can afford to do so.
With bonus Qantas Points and a range of complimentary insurance covers, the Westpac Altitude Platinum - Qantas is worth considering if you want more frequent flyer points.
Earn Altitude rewards with Westpac’s Altitude Platinum credit card, while enjoying the benefits and privileges of platinum status.
Funding Christmas festivities pushed Aussies $24.3 billion deeper into debt, according to Finder, Australia’s most visited comparison site.
Learn more about how PayActiv's Earned Wage Access service can help you access up to $500 of your paycheque for a $5 fee charged fortnightly (only if you access your wage before payday).
New research shows that economists are positive our economy is improving, but 1 in 4 Aussies are worried about paying their mortgage or rent.
Get $250 credit back when you meet the eligibility requirements and 55 days interest-free on purchases.
Pay no interest on your credit card debt and clear it faster with a 0% balance transfer credit card. Compare and apply here.
Here's what borrowers need to know about home loans with redraw facilities.
Explore the benefits of rendering a house versus renovating, and the ways which render can improve your home’s overall performance.