What Is An Outstanding Balance On A Credit Card?

What is an outstanding balance on a credit card? And when is this figure different from your statement balance? The terms “outstanding balance” and “statement balance” are often used in place of one another, but they’re not the same. Read on to find out what these credit card terms mean and why understanding these terms is essential for managing your finances.

What is an outstanding balance?

An outstanding balance on a credit card is the amount of money you owe the minute you check your account. This amount includes all charges on your account you have not paid for, including recent purchases you may have just made.

Your credit card’s outstanding balance can also include any credit card interest and fees that have accrued. If you’ve just made a payment on your credit card, your outstanding balance will also reflect that fact, regardless of what your credit card’s statement balance says.

What is a statement balance?

Your credit card statement balance is different from your outstanding balance. This amount is what your credit card bill shows on the date your billing cycle ends, and it is determined based on the number of purchases made on your account during the prior 28- to 31-day billing cycle, as well as any accrued fees or interest charges. For example, if you made $1,000 in purchases during a billing cycle and your balance was $0 before that, your next statement balance would show an amount of $1,000.

Most importantly, your credit card statement balance is also the amount you need to pay in full each billing cycle to avoid being charged credit card interest on remaining balances during the following billing period.

Outstanding balance vs. current balance

Your credit card’s outstanding balance and current balance are essentially the same thing. If you log in to your online credit card account or your credit card company’s mobile app and either one says you currently owe $1,081 on your credit card, that amount is your outstanding balance and current balance.

How much of your outstanding balance should you pay?

Paying your full statement balance each billing cycle is how you can avoid interest charges on purchases made with a credit card. However, you always have the option to pay more than your statement balance and up to your outstanding balance at any given time. Some credit card issuers even let you make overpayments toward your credit card account to “pay ahead” for purchases currently pending on your account or ones you plan to make.

There are several benefits to paying more than your statement balance and up to your credit card’s outstanding balance regularly. For example, keeping up with your regular spending payments on your card can help you stick to your budget and monthly spending plan. Making regular payments to your outstanding balance is also a great way to avoid long-term credit card debt or instances where you might wind up spending more than you planned.

How does an outstanding balance affect my credit score?

The outstanding balance on your credit card may or may not significantly impact your credit score. This is because credit card companies only report your balance to the credit bureaus — Experian, TransUnion and Equifax — once a month at the end of every billing cycle.

This means you could owe $5,000 on your credit card on the 3rd of any given month, pay off your outstanding balance on the 10th of the month and show a $0 credit card balance by the time your credit card billing cycle ends around the 20th of the month.

The credit card balances that are ultimately reported to the credit bureaus do impact your credit score. Your amounts owed (also called credit utilization ratio) is the second most crucial factor that makes up your FICO score.

Most experts recommend keeping your credit utilization ratio below 30 percent of your total available credit. This means making sure your balance reported to the credit bureaus is never more than $3,000 for every $10,000 in available credit.

What is the average outstanding balance?

Recent data from the Federal Reserve shows that the average credit card balance in the U.S. increased from 2023 to 2024. Credit card balances are now at $1.14 trillion and increased by $27 billion during the second quarter. This is equivalent to a credit card balance of $6,501 per cardholder.

The bottom line

Understanding your outstanding balance is important for you to continually pay your statement balance in full each month and avoid interest. However, you can also pay extra toward your outstanding balance to stay ahead of your spending and avoid long-term debt.