What is Outstanding Balance?

What is Outstanding Balance?

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Outstanding balance refers to how much money you still owe on your credit card or loan. For example, if you use your credit card to buy something and haven't paid it back yet, that money is part of your outstanding balance. It's very important to know this amount because it helps you understand your current debt level. Interest charges are also typically based on how much of an outstanding balance you have. The smaller your outstanding balance, the less you'll pay in interest. Note, too, your outstanding balance includes interest, fees, purchases, cash advances, etc. It is also known as your current balance.

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3 things to know about Outstanding Balance\

1. Interest is Calculated on Outstanding Balance: The amount of interest you owe on a loan or credit card is usually calculated based on your outstanding balance. The higher your outstanding balance, the more interest you'll have to pay.
2. Outstanding Balance Affects Your Credit Score: Maintaining a high outstanding balance can negatively impact your credit score. The credit bureaus like to see that you're not using all of your available credit. [1]
3. Making Minimum Payments May Not Lower Balance Quickly: If you only make the minimum payment on your credit card each month, it might take a long time to pay off your outstanding balance. Most (if not all) of your minimum payment may go towards the interest, not lowering the principal balance.

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Citations

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• https://www.myfico.com/credit-education/credit-scores/amount-of-debt

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Disclaimer: Yendo is not a provider of financial advice. The material presented on this page constitutes general consumer information and should not be regarded as legal, financial, or regulatory guidance. While this content may contain references to third-party resources or materials, Yendo does not guarantee the accuracy or endorse these external sources.