Understanding the financial world requires knowing certain words and ideas that affect our money and decisions. One important term that shows up in credit card bills, loans, and other accounts is “outstanding balance.”
This number is crucial because it represents the total amount you owe to lenders or creditors right now. It includes the money you borrowed, the interest you owe, fees, and other charges.
Knowing what an outstanding balance means is important for planning your money, managing debt, and getting on solid financial ground. This article explains what an outstanding balance is and why it matters for your financial health.
What Does An Outstanding Balance Mean?
Outstanding is a word used in economics and finance to describe amounts that have not been paid or settled yet. It’s similar to having a bill to pay or money that others owe you.
When a customer purchases something from a business, they get a bill. The customer now owes the business money. The money the customer owes is called an outstanding balance. As long as the customer hasn’t paid the bill, it is called an outstanding balance. But once the business gets the money from the customer, the amount is no longer outstanding.
The outstanding amount is the money that the business will receive in the future. When a customer receives an invoice, there is usually a deadline for when they need to pay the outstanding amount. Businesses often have outstanding balances because of payment deadlines.
There Are Various Kinds Of Exceptional Or Remarkable Things
Outstanding invoices: These are documents showing money that others need to give you but haven’t paid yet. This could be for things you sold or services you provided.
Outstanding debt: This is the money that you need to pay back to others. It can be from loans, credit card debt, or other kinds of debt.
Outstanding payments: These are the amounts that people owe you, but you haven’t received them yet. It could be money from sales or services that customers haven’t paid for yet.
Is An Outstanding Balance Distinct From A Statement Balance?
Your credit card bill amount is not the same as before. It shows the total amount you owe at the end of your billing cycle, which is usually around 28 to 31 days. This amount is calculated based on the purchases and debits you made during that time. For instance, if you spent $1,000 during the billing cycle and had no previous balance, your next bill would show $1,000.
However, your statement balance can also show interest charges and fees that were added during the last billing cycle. Your credit card statement balance is also the amount you must pay completely every billing period to avoid being charged credit card interest on any remaining balances in the next billing cycle.
How Much Should You Pay Toward Your Outstanding Balance?
As we said before, if you pay the full amount you owe on your credit card bill every month, you won’t be charged any extra money. But you can also choose to pay more than what you owe if you want to. Some credit card companies even let you pay more than what you owe in order to pay for things that haven’t been charged to your card yet or things you plan to buy in the future.
There are many advantages when you pay more than your bill and up to the total amount you owe on your credit card regularly. For instance, making regular payments on your card can help you stay within your budget and monthly spending plan. It is also a good way to prevent accumulating a lot of debt on your credit card or spending more than you intended.
How Does An Outstanding Balance Impact Your Credit Score?
Your credit score considers various factors. One important factor is how much credit you use compared to your total credit limit. This is called credit utilization and it makes up 30% of your FICO Score.
Having a high credit card balance for a long time can make your credit score go down. Keeping track of how much you owe on your cards can help you avoid this. Do you still have questions about how to build and keep good credit in the United States? Upwardli can assist you! We can help you improve your credit score and teach you more about the U.S. financial system.
What Is The Current Average Outstanding Balance?
Credit card companies don’t always tell credit bureaus about how much money you owe. They only share this information once a month, usually at the end of your billing cycle. This means we don’t have complete information on the average amount of money people owe on their credit cards.
But, new information from Experian reveals that the typical amount owed on credit cards by people in general was $5,910 in 2022. This amount is more than 13 percent higher compared to 2021, where the average credit card balance was $5,221.
An outstanding balance is an important number that shows how much money you still owe. Knowing this helps you make smart choices about paying off debts, budgeting, and managing your money. By keeping track of and handling your outstanding balances well, you can have better financial health, lower your debts, and maybe even improve your credit score. It’s not just about keeping up with what you owe, but also finding ways to bring that number down and eventually get rid of it completely. This will give you more freedom and stability with your finances.
Thanks for reading. I hope you find it interesting.
