Imagine it is the end of the month, and you are excited to see your latest Credit Card statement. You have made a few purchases, perhaps treated yourself to a nice dinner, bought some clothes and filled up your car with petrol. As you glance over the statement, one term catches your eye: Current Outstanding.
You might wonder, what is the 'Current Outstanding' meaning in a Credit Card? Understanding what is outstanding amount in a Credit Card is crucial for effective financial management and avoiding debt.
What is an outstanding balance?
The outstanding balance is the total amount you owe to the credit card issuer at any given time. This balance is a cumulative figure that includes all your recent transactions, such as purchases made at your favourite shopping malls in Mumbai, online payments for subscriptions, dining expenses at a Delhi restaurant, and any cash advances. It also encompasses various charges and fees, like annual fees or late payment charges, minus any payments or credits that have been applied to your account.
For instance, imagine you've used your credit card for a variety of purchases totalling ₹30,000 in a month. If you've made a payment of ₹10,000 towards your card, your outstanding balance would be ₹20,000. This is the amount you would need to clear to bring your balance to zero. This dynamic balance increases with each new charge and decreases as you make payments, reflecting your current debt to the card issuer.
Also Read: Know how to instantly activate and use your Credit Card
Difference between outstanding balance and statement balance
While the outstanding amount is a real-time figure, the statement balance is the amount reported at the end of a billing cycle. The statement balance is a snapshot of what you owe on the statement's closing date and doesn't include transactions made after that date.
Should you pay the outstanding balance?
Paying the full outstanding balance each month is ideal. It helps you avoid interest charges and maintain a good credit score. If paying in full isn't feasible, at least aim to pay the minimum due to avoid late fees and adverse credit reporting.
Link between the outstanding amount on a Credit Card and credit score
Your outstanding balance directly impacts your credit score, particularly your credit utilisation ratio, which is, the percentage of your credit limit you're using. High utilisation can lower your score, signalling to lenders that you're a higher-risk borrower.
Interest on the outstanding Credit Card balance
Any portion of the outstanding balance carried beyond the grace period attracts interest. The rate varies based on the card and the type of transaction (purchases, cash advances).
How is Current Outstanding Calculated?
To understand how the outstanding amount on a Credit Card is computed, let's take an example:
Suppose you start with a balance of ₹10,000. During the month, you make purchases totalling
₹5,000 and a payment of ₹3,000. Additionally, you incur ₹200 in interest and ₹100 in fees. Your current outstanding balance will be calculated as follows:
Outstanding Balance = {Starting Balance} + {Purchases} - {Payments} + {Interest} + {Fees}
Outstanding Balance = ₹10,000 + ₹5,000 - ₹3,000 + ₹200 + ₹100 = ₹12,300
Thus, your current outstanding balance on the Credit Card is ₹12,300.
Importance of tracking Current Outstanding amount on Credit Card
- Tracking your current outstanding on Credit Card helps you stay aware of your spending, preventing you from exceeding your credit limit and avoiding over-limit fees.
- Regularly checking your outstanding balance lets you plan your expenses better, helping you stay within your budget and avoid unnecessary debt.
- Keeping track of your balance ensures timely payments, helping you avoid late fees and high-interest charges, which in turn supports a good credit score.
Tips to manage your Credit Card's Current Outstanding balance
- Try to pay more than the minimum amount due to reduce your balance faster and save on interest.
- Address high-interest Credit Cards first to decrease your financial burden more efficiently.
- Set up payment alerts or reminders to notify you when your due date is approaching.
- Refrain from using your Credit Card for new purchases while you are trying to pay off the outstanding balance.
- Look for cards with lower interest rates for balance transfers to save on interest payments.
Conclusion
Grasping the concept of your Credit Card's outstanding amount is a vital step towards adept financial management. It helps avoid debt accumulation and maintain a healthy credit score.
For Axis Bank Credit Card holders, this knowledge, coupled with the bank's user-friendly online services, offers a streamlined way to monitor and manage your finances effectively. Embracing these practices ensures that you are always in control of your spending and credit health, keeping your financial future secure and bright.
Also Read: Smart Credit Card selection: A 3-step guide
Questions about outstanding amounts
1. How can I check my Credit Card outstanding and available credit limit?
Most Credit Card issuers, including Axis Bank, offer online and mobile banking services where you can check your outstanding balance and available credit limit. These tools provide real-time updates and are a convenient way to stay on top of your finances.
2. What is the total amount due, and how is it calculated?
The total amount due is the minimum amount you must pay by the due date to keep your account in good standing. It includes a portion of your outstanding balance plus any interest and fees.
3. What is the minimum amount due, and how is it calculated?
The minimum amount due is a smaller portion of your total due amount. Paying just the minimum keeps your account active but can lead to higher interest charges in the long term.
4. What happens if I do not pay any amount due before the due date?
Failing to pay before the due date can result in late fees, increased interest rates, and negative impacts on your credit score.
5. How can I check the available Credit and Cash Limit of my card?
Your available credit and cash limit are visible through your online banking dashboard or monthly statements. Regularly checking these limits helps you manage your spending and credit utilisation.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
