Current Balance vs. Payoff Amount

Payoff amount and current balance are related but not equivalent terms.

Current balance means the amount you owe according to your statement. The next day, you will owe more. In other words, if you are trying to pay off a credit card and the statement says your balance is $514, you may not be able to bring your balance to zero and satisfy the debt by writing a check for $514. Instead, you would need to contact your lender to find out your payoff amount.

Payoff amount is how much you would have to pay to satisfy the debt. It is not the same amount as the current balance on your statement — at least not for long.

The difference between the current balance according to your statement and the payoff amount is crucial when you are ready to pay off your debt.

You can think of the payoff amount as a more-current balance number. But if you are trying to eliminate a debt, you need to pay it all off. And if you just pay the current balance according to your statement, you may be left with a few cents or dollars left in the account. That small amount will accrue interest and grow. If you never pay it off, it could become more than an irritation; it could become a significant obstacle to eliminating your debt.

So before you pay off a debt, call the lender to find out exactly how much you owe, and how much it will take to pay the debt off, in full.

Updates

  • 2011-02-07. Originally published.
  • 2015-03-27. Revised.

Featured image: “Teeter-Totter Crossing” by SushiFugu is licensed CC BY-NC-ND 2.0.

  • Andrew Hipszer

    Usually with revolving debt finance charges are only debited monthly… only on fixed loans must you usually worry about having an accurate daily payoff to satisfy a debt…

    With revolving debt (credit cards, lines) there is usually a grace period.

  • Harry

    Basically interest is paid in arrears. I will start with a simple example. I have a loan payment of $210.00 due on June 1st. On June 1st, I pay $110.00 to the financial institution (Bank, Mortgage Company, Credit Card Company, Credit Union, etc.) . The balance after my June 1st payment is $100.00. During the month June, the financial institution will levy the agreed (between me & the fianncil institution) upon interest on this loan balance of mine of $100.00. So let us say the interst is $10.00 for June. Then I get a statement some time during June, showing my June 1st payment & it being credited towards my loan and the payoff amount on the loan on July 1st. Let us say this is $110.00. On July 1st I make a payment of $110.00 towards the loan. This example shows that the June 1st balance and July 1st payoff are not the same. I hope this helps.

  • Ali

    [Personal details removed. –Ed.]

    Does anyone care about this debt it do they just want my money???

    • alejandra

      Thank you! This answered all my questions!

    • http://caveatemptorblog.com Sam Glover

      What do you think? Creditors and debt collectors aren’t altruistic. They just want your money.

  • ovi-007

    I work for a credit card company and sometimes he customer just doesnt allow you to help them when I tell them I can calculate the payoff amount so the can bring the balance down to zero they think I actually cheating or changind the amount because I want to thats very frustrating for me because they dont understand they should read more articles like these so they can learn how that works if not then they shouldnt get any loan at all…

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