Home Financial Information What is Outstanding Balance and How Should you Handle it?

What is Outstanding Balance and How Should you Handle it?

by Seth
What is Outstanding Balance and How Should you Handle it?

What is an outstanding balance? The other word for outstanding balance is the current balance. It refers to the overall unpaid amount on the credit card. It includes cash advance, purchases, fees, balance transfers, and interest charges. Do you know how to handle it? It is about personal finance management. It would help if you handled the credit card bills.

There is the usage of credit cards daily. Knowing an outstanding balance will help you keep track. Doing research and asking will consume time. We have invested hours of research in explaining the concept. To help you out, you will know outstanding balance meaning. Scroll down for more information. 

Definition of Outstanding Balance

“The opening balance is the amount you owe to the bank. People generate it by making purchases on a credit card. The amount is outstanding for the repayment. If it is minimum, people should repay it with the settlement. If not, the bank charges the interest”.                            

                                                                                                                      –OCBC Bank

Things That Can be Included in Outstanding Balance

Purchases

There are particular types of purchases that you make using credit cards. There is more security in the card offers. Several cards offer extra benefits like purchase points. It can add up over time.

The following purchases are: –

·         Car rents

·         Appliances and Electronics

·         Cell Phone bills

·         Event Tickets

·         Travel Arrangements

·         Cell Phone Bills

·         Overseas Purchases

Balance Transfers

You can move the outstanding debt of one credit card to another card. It is a balance transfer. The consumer uses a credit card balance who prefers amount movement. It reduces the interest rate and enjoys good benefits. It has rewards programs to earn cashback. There are points that you can earn as per daily expenditure. 

Cash Advance

A credit card cash advance is the cash withdrawal from the credit card account. It is about borrowing against the credit card in the pocket. The banks create a cost to the credit card advance. In some situations, there are limits on the amount you withdraw. 

Interest Charges

You receive the credit bill every month. Pay the complete bill amount by the credit end period. You need to avoid paying interest in an outstanding amount. You will get 20 days from the statement issue date. The period is essential to pay the credit card bill. 

Fees

We all deal with credit card fees. We do not enjoy the fees. The credit card charges fees on everything. It isn’t easy to keep track of them. You may know them as over-limit, late fees, balance transfer fees, and more. The fees can be unpleasant.

The credit card fees are vital to knowledge. It is essential if you are dealing with the debt of a credit card. Many people get lost using a credit card. They do not know using the same. You should avoid the fees of the credit card.

Why Outstanding Balance Should Never be Ignored?

There are a lot of reasons you should not avoid for outstanding balance. Some of them are as under.

Where Can We Find Outstanding Balance Listed?

SMS Alerts

The banks provide SMS alerts to you. You use their card for the payment. Find the outstanding balance to the credit through bank SMS. It happens in real-time. They enter the right amount. The statement will show the entire outstanding balance. 

ATM.

You can find the outstanding balance of credit cards at the ATM. Automatic teller machine facilitates PIN and has access.

Net banking.

Net banking is an effective way to have a check on opening balance. Register a credit card with a net banking application. You are using a credit card. Fit the details of the credit card on the mobile application.

Outstanding Balance vs. Remaining Balance

Example: –

You spent $800 on your credit card. To find the transaction, you log in to the bank credit app. It will show an outstanding balance of $800.

It is not necessary to pay the entire $800 opening balance. You can pay $400. You have paid the amount of $400.

You need to pay the remaining $400. That $400 is the remaining balance.

The outstanding balance and remaining balance are two terms to discuss. You owe the amount for the payment. Outstanding balance refers to the total amount you owe. It is the same as your remaining balance.

Outstanding Balance vs. Principal Balance

It is crucial to understand outstanding balance vs principal balance. It helps you know interest or fees on credit card transactions.

The principal balance is the opening balance. It is without fees or interest on a credit card. Outstanding balance refers to the total amount with fees or interest. Both are similar if there is no interest.

The principal balance relates to the actual loan amount. The outstanding balance includes the original loan amount with interest.

Once the interest amount gets added to the amount, they’re different. You pay monthly installments without interest in the principal balance.

Average Outstanding Balance Definition

“The average outstanding balance is the interest-bearing and unpaid balance. Average outstanding balance refers to a credit card debt. The bank charges the interest. It can be an average measure of the outstanding balances of the borrower. People measure it over time.”

                                                                                                                    – By Investopedia

Effect of Outstanding Balance on Credit Score

You need to pay more than the principal amount in your credit card balance. You pay the issuing bank. The balance of the credit card affects the credit score. It matters where you get approved for a loan or a new credit card. When the system reports to the credit bureau, it changes.

The credit score is similar to numeric grade. It shows you ‘re trustworthy in a particular period. There are essential ways to get a credit score. Several of them are free.

The credit score is as per the information of the credit history. It includes loans, other debts, and credit cards. The information is on the report of the credit. Payment history and the credit limit is on the credit report. The credit report is helpful to calculate the credit score.

Every factor has a different weighting in credit calculation scores. The main factors affect the credit score. A percentage represents the significance: –

Ø  Credit length accounts for 15 percent.

Ø  The history of the payment accounts for 35 percent.

Ø  Outstanding debts, Entire debt amount Vs the credit limit. It accounts for 30 percent.

Ø  Credit mix account and credit inquire accounts for 10 percent.

The debt level is the most crucial factor which affects the credit score. It is about credit usage. It is the credit card balances compared to credit limits. You need to reduce credit usage as it is a better option. It shows that you can use a credit card.

You have not exceeded the credit card balance. Have a less credit card balance compared to credit limits. It will help you to get higher rewards with a good credit score. The opposite is also beneficial. Lower credit score with higher credit card balances.

Difference between Outstanding Balance and Debt

Outstanding balance is the money that you owe to the debt. It charges interest. For instance: – Credit card. It relates to the amount that you owe from the purchases. Outstanding balance is referred to the other attractions with a credit card. Current balance is the other word for the outstanding balance. 

The card issuers give a particular spending limit on the credit card. The outstanding is essential to know how much money remains to spend? It would help if you found the remaining balance. Subtract the outstanding balance from the credit limit. It would help if you did not forget to calculate the charges. Those charges are not shown on account of a credit card.

Frequently Asked Questions (FAQs)

What is the balance owed?

Balance is the owed balance is the difference between the amount. The amount which has been credited.  The amount that has been debited to the load account during calculation.  

How is outstanding balance calculated?

Subtract the payments made to the original balance. The interest rate is applicable for the loan payment.

 Should I pay statement balance or outstanding balance?

You pay a regular statement balance. The due date will help you avoid interest charges. You need to pay the complete balance. It will be beneficial to improve credit scores.

 How is my credit card outstanding balance calculated?

Count of several days from transaction date made X complete outstanding amount X per month interest rate X 12 months/ 365.

 What is outstanding mortgage balance?

The outstanding mortgage balance is the total money amount. It would take to pay the loan. This depends on the original amount which is borrowed. How much have you paid? The annual rate of interest.

How do you calculate the outstanding balance on a mortgage?

The outstanding balance of the mortgage is the total money amount. The money would be essential to pay the entire loan. The amount depending on the borrowing and annual interest rate. 

Bottom Line

What does outstanding balance mean? Outstanding balance is the overall unpaid amount on the credit card. The vast balance of credit can destroy your credit payment history. It might be difficult for credit qualification.

Focus on paying principal amounts with high interest. I hope you understood the basics of handling outstanding balance. If questions, let us know in the comments section.

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