Outstanding balance, meaning the amount owed on a credit card or other credit product, is important to track and manage.
In fact, if not managed correctly, an outstanding balance can have a negative impact on a person’s credit score.
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Table of Contents
- Outstanding Balance Meaning
- Should I Pay Off Outstanding Balance?
- Frequently Asked Questions
- Do You Want Help Opening a US Bank Account?
Outstanding Balance Meaning
Outstanding balance, meaning the amount a person owes, most commonly appears on credit cards, loan balances, mortgages, and credit products. Therefore, outstanding balance refers to the amount of money that an individual still owes on these credit products. Importantly, in certain instances, credit providers may refer to outstanding balance just as balance.
Should I Pay Off Outstanding Balance?
You should pay off your outstanding balance at the end of each month if you are looking to maximize your credit score. That said, this approach typically relates to credit cards only. This is because, when using debt for positive reasons, such as acquiring assets and longer term financing, it is unlikely that you will pay off the entire balance until the payment schedule has reached completion.
Does an Outstanding Balance Affect Your Credit Score?
Yes, an outstanding balance can affect your credit score. In fact, the amount of debt that a person has consumed is a key consideration when formulating a person’s credit score. More specifically, experts suggest maintaining a utilization of less than 30% of your total credit. In other words, if you have 10,000 in available credit on a credit card, you should only carry an outstanding balance of 3,000 at any given time.
Does an Outstanding Balance Affect a Business Loan?
Yes, outstanding balance does affect a business loan when the required payments are not made in accordance with the repayment schedule. That said, when referring to longer term financing, like a business loan for capital expenditures, it is common to have an outstanding balance for a long period of time.
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Frequently Asked Questions
Below are three of the most common questions that we receive from people looking into the meaning of an outstanding balance. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
Does Outstanding Balance Mean I Owe Money?
Yes, outstanding balance refers to the amount of money that you owe. This may be the full amount originally owed, such as the balance due on a credit card or the partial amount owed after an initial payment has already been made.
What Is an Example of an Outstanding Balance?
An example of outstanding balance is the amount that you owe on a credit card at the end of the month. This is often referred to as the outstanding balance, which is the amount that the cardholder needs to pay at the end of the billing period.
Is Outstanding Balance the Same as Balance?
Whether outstanding balance is the same as balance depends on the source that you are referring to. For example, if you are referring to the balance on an unsecured credit card, then both outstanding balance and balance mean the amount owed by the cardholder. However, if you are referring to the balance in a bank account, this specifically refers to the amount of funds held in the account.
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