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Outstanding Balance Explained

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Last editedNov 20212 min read

When taking out a credit card, whether you’re looking at business credit or for personal finances, it’s important to understand the process and terminology well. Credit cards are a great way to spread out the cost of a transaction or to ease up your cash flow while you’re waiting for income to arrive, but they can also cause financial difficulties if you miss or make late payments.

Outstanding balance, which is sometimes also known as current balance or balance outstanding, is a figure on your credit card statement that refers to the total unpaid amount. Given that you do not pay immediately when using a credit card, this figure shows what you are due to pay by the end of the agreed term, which is usually monthly. Keep reading to find out more about outstanding balance and what it means for your credit.

What is outstanding balance?

Many new credit card owners ask themselves “What is outstanding balance?”. As previously mentioned, the total outstanding balance indicates the unpaid amount that remains on your credit card. This figure takes into account a number of different expenditures, including purchases, transfers, cash in advance, interest charges and fees. It is therefore a great summary of everything that you owe on your credit card.

In addition, your balance outstanding gives you an indication of how much credit you have available to use. You can calculate this by subtracting the outstanding balance from your credit limit and then accounting for any outstanding charges that are not showing in your account.

For example, if your outstanding balance is £1000 and you have a credit limit of £4000 and a transaction of £100 that hasn’t appeared yet in your statement, you have £2900 available credit (£4000 - £1000 - £100 = £2900).

What is the difference between outstanding balance and statement balance?

Your credit card outstanding balance is actually different from what is known as the statement balance. Whereas outstanding balance is a current picture of what you owe, your statement balance refers to the amount of money that you owed in the previous statement that you received. This may also be shown as monthly balance or new balance.

In other words, your statement balance indicates all of the transactions that occurred within the most recent billing cycle, which is usually monthly. Your statement will not always be the same figure as the balance outstanding, depending on the recent activity on your card. For example, if you have made a payment after the monthly statement end date, then you will see a difference in the two figures.

Paying off your credit card balance

If you want to stay in good standing with your credit card provider, then it’s a good idea to pay off your statement balance each month. What’s more, it means that you will avoid paying interest on your purchases.

The best option is to pay off all your balance each month, which will help you to avoid the interest charges that are incurred by a positive credit card outstanding balance. It’s not always easy to stay on top of credit card payments, however, and you may sometimes find yourself unable to pay the full balance. In these cases, you should pay the minimum payment, which will allow you to keep your credit score intact.

If you’re struggling to stay on top of credit card repayments and interest, then you could also consider Buy Now Pay Later (BNPL) as a convenient and cost-effective alternative. In a nutshell, these third-party providers provide interest free credit that you can pay off in manageable instalments.

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Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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