Basically, a credit card balance is how much money you owe to your credit card company.

When you spend money on your credit card, the balance increases. But when you make a repayment, the balance decreases. At the end of the billing cycle, if any balance remains, it will be carried over to the next month’s bill.

Credit card balances are important. They are used to figure out your credit score. If you want to open a new credit card or take a loan, future creditors will look at your balances to decide whether you are worthy to be given a new card.

The balance of your credit card usually consists of many factors, including (1) purchases; (2) balance transfers from other credit cards; (3) foreign exchange if you use your card to take out foreign cashes; (4) fees such as late payment charges, returned payment charges; (5) annual fees and cash advance fees; (6) loan payments.

These balances change monthly, depending on the activity on the card. If you make minimum payment, the remaining balance will be carried to the next billing cycle.

Carrying these balances may affect your credit score. These balances will be calculated into your credit utilization, which may comprises 30% of your cresdit score. Thus, you should remember not to carry too much balances and make repayment on time.

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