What Is Outstanding Amount in Credit Card?

We’ve all experienced it: looking at a credit card statement and wondering what those numbers mean. Two frequently mentioned terms are “outstanding balance” and “statement balance.” Although they may sound similar, they represent different parts of your credit card debt. It’s easy to get confused, but let’s explore the details to help you understand the difference between these two important terms and gain better control over your financial situation.

What is outstanding amount in credit card?

The outstanding balance on a credit card is the total amount you owe at any given time. It includes all your purchases, cash advances, balance transfers, fees, and interest that have been added to your account.

Also known as the current balance, it can change daily. For example, if your outstanding balance is ₹500 in the morning and you receive a ₹50 credit during the day, your new balance would be ₹450, even if the credit hasn’t been fully processed yet.

To see the most accurate amount you owe, always check your outstanding balance.

Outstanding Balance vs. Current Balance

Outstanding balance and current balance mean the same thing on a credit card. Both refer to the total amount you owe on your card at a given point in time. You can find this amount by logging into your credit card account or app. For example, if your account says you owe ₹2000, that’s both your outstanding and current balance.

Difference Between Outstanding Balance and Statement Balance

Your outstanding balance is the total amount you owe on your credit card. The statement balance shows how much you owed at the end of your last billing cycle, usually a period of about 30 days.

Your monthly credit card statement will typically show both your outstanding (or current) balance and your statement balance. These two amounts might be the same, but they often differ if you use your card or make a payment after your statement closing date.

You can calculate your statement balance like this:

• Total all your purchases, fees, balance transfers, and cash advances for the billing period. Let’s say this adds up to ₹3,000.
• Next, add up all your payments and credits for the same period. Let’s suppose this is ₹1,000.
• Subtract the total payments and credits from the total purchases and fees. Your resulting statement balance would be ₹2,000.

If you don’t make any other transactions, your statement balance and outstanding balance for that billing cycle will be the same: ₹2,000.

However, if you make more purchases after the closing date of that billing cycle, your statement balance stays at ₹2,000, but your outstanding balance will include these new purchases.

Should You Pay the Outstanding Balance?

Paying off your entire credit card balance is a good option if you can afford it. This completely eliminates your bill, preventing interest charges. It also resets your credit card balance to zero, which is better for your credit score. Credit bureaus prefer low credit utilisation ratios, and paying off your balance gives you a perfect score of 0% for that card.

However, you won’t necessarily owe interest if you only pay the statement balance. Many credit cards offer a grace period, allowing you to avoid interest charges if you pay the full statement balance by the due date.

It’s important to note that not all credit cards have grace periods, and some issuers may temporarily remove this benefit if you don’t pay your full balance on time.

Understanding the Link Between Your Credit Score and Outstanding Amount

Your credit card balance doesn’t just impact your interest payments; it also affects your credit score. This number reflects your financial history and ability to repay debts. Lenders use it to decide whether to approve your loans or credit cards and at what interest rate.

As mentioned earlier, one factor that affects your credit score is the credit utilisation ratio. This is the percentage of your available credit you’re currently using. To calculate it, divide your outstanding balance by your credit limit and multiply by 100.

For example, if your limit is Rs. 50,000 and you owe Rs. 35,000, your utilisation rate is 70%. This means you’re using 70% of your available credit.

A high utilisation rate suggests you rely heavily on your credit card and might struggle to repay it. This increases risk for lenders and lowers your credit score. A low score makes it harder to get loans or credit cards with good interest rates.

Ideally, you must keep your utilisation rate below 30%. This shows responsible credit use and good debt management, improving your credit score and chances for better credit offers.

Closing Thoughts

Understanding the difference between your outstanding and statement balance is crucial for managing your credit card effectively. By knowing these terms and how they impact your credit score, you can make informed decisions about your spending and repayment strategy. With Jupiter Edge UPI Credit Card, you can effortlessly track your outstanding amount and other financial details through the bank’s user-friendly online platform. This empowers you to stay on top of your finances, avoid unnecessary interest charges, and maintain a healthy credit profile.

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