Outstanding Balance: What It Means on Your Credit Card Statement

It might alarm you to learn the average American owes over $90,000 in debt. A large portion of this is credit card debt. While this form of consumer debt isn’t always bad, it’s recommended to pay your balance off sooner rather than later.

This could be difficult depending on the amount owed, but there are ways to tackle every debt situation. Let’s explore the key information you need to know about your outstanding balance on your credit report.

What Is an Outstanding Balance?

This term refers to a situation where you still owe money on your credit card even after paying your monthly bill. For example, let’s assume that you spent $1,000 on a credit card last month. Your minimum payment is $50. Since money has been tight, you can only afford to pay the minimum payment. You’d then have an outstanding balance of $950.

It’s important to note that your outstanding balance and current balance are essentially the same thing. The term used will vary depending on your credit card provider. People who have multiple credit cards may find that their accounts use one or the other.

Statement Balance vs Outstanding Balance

While your current balance and outstanding balance are the same thing, your statement balance and outstanding balance are notably different. Your statement balance includes debits, interest charges, and fees from your previous billing period. This is also the amount you’ll need to pay to avoid being charged interest.

How Much Should I Pay?

As a general rule of thumb, it’s recommended to pay as much as you can. The higher your outstanding balance, the more money you’ll accrue in interest. This can quickly add up and make it more difficult for you to overcome your debt.

In some situations, it can be virtually impossible to pay down your balance if you only make your minimum payments. You should also avoid using credit cards while attempting to pay off your balance. Many people fall into this trap, and it can make your situation even more difficult to accommodate.

For instance, let’s assume you owe $10,000 across multiple credit cards. Instead of putting the cards away and only using money from your checking account, you continue to use the credit cards while making the minimum payments. Within a few months, you find that you owe $13,000 across all your credit cards. As you can see, this can create a perpetual cycle that keeps you struggling with debt.

How Does It Affect My Credit?

Your outstanding balance plays a large role in your overall credit score. There are actually two components to this metric. The first is the balance amount itself. The higher your balance, the lower your score. However, having a higher outstanding balance also means you have less available credit. Combined, these two metrics make up a large part of your score. The good news is that paying your outstanding balance down can quickly raise your score to its previous levels.

In fact, it’s possible to have your score increase by hundreds of points within a single month if you were to pay off everything you owe. At the very least, you should continue to make your minimum payments. Missing a payment can significantly hurt your credit score. Missed payments also stay on your credit report for long periods of time. If you never satisfy your missed payments, the debt will be turned over to a collections agency.

You might even receive credence resource management calls from a debt collection company. These can be invasive and annoying, so it’s best to avoid the situation at all costs.

Why Is My Credit Score Important?

Your credit score impacts many different areas of your life. For example, you could find it difficult to acquire financing for a new car if you have a poor credit score. This is because lenders will view you as a financial liability. Even if you have a low score due to circumstances outside your control, lenders wouldn’t be willing to take the risk. If they do choose to provide money, it’ll come at a much higher interest rate than normal.

Your credit score can also affect your capability to rent a home or apartment. It’s best to maintain a high score so you stay prepared for contingencies. The last thing you want is to be unable to attain financing or housing due to past credit mistakes.

What If I Can’t Pay?

If you can’t make the appropriate payments, this is a sign you need to reconfigure your lifestyle. One of the best ways to do so is by spending less money. Most people can trim their budgets, and this often results in saving a substantial amount.

For instance, you might discover that you pay hundreds per month on dining out, subscriptions, and unnecessary purchases. Saving this money can make accommodating your debt much easier. Another way to handle this situation is to find ways to make more money. It’s not uncommon for people to pick up part-time jobs on weekends to increase their income.

You can also try to monetize a hobby. For instance, someone highly skilled in creating fine art could sell their creations online. Selling old possessions is a fast and easy way to make extra cash. You might even discover you make far more than you anticipated. This is especially likely if you sell antiques or collectibles.

To clarify, let’s assume you have a garage sale and discover a pack of unopened vintage baseball cards. Upon researching them, you discover they’re worth around $5,000. While situations like these aren’t guaranteed, chances are you can quickly find ways to help pay your bills.

Keep Your Outstanding Balance Minimal

There may come a time when you’ll need to leverage your available credit and maintain an outstanding balance. However, it’s imperative to pay it off as soon as possible. This will help you maintain a high credit score and reduce the amount you owe in interest.

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