What does current outstanding mean in credit cards? An explainer

If you have a credit card, it becomes vital for you to manage it properly. This can be done efficiently if you can understand basic terms associated with credit cards so that you can better appreciate your monthly statements and plan spending accordingly.

One of the most crucial terms in the same regard is the “Current Outstanding.” This figure directly influences your repayments, credit scores, and overall credit profile.

What does current outstanding mean in credit cards?

The current outstanding is simply the unpaid balance due on a credit card at a given point in time. Manish Shara, Co-founder and CEO of ZET, explains this, adding, “The current outstanding is the total unpaid balance on a credit card at a given point in time. It includes purchases, EMIs, fees, and any interest accrued. Monitoring and clearing this amount on time is important, as delays increase interest costs and negatively affect the borrower’s credit score.”

Therefore, as a responsible credit card holder, it becomes extremely important for cardholders to keep their borrowing under control, never allowing their credit utilisation ratio to go beyond 30% of the total credit limit. This simply means that if your total permitted credit limit is ₹50,000, then you should never exceed ₹15,000 on this limit.

Consequences of not paying your current outstanding balance

Not paying the current outstanding in full can result in:

• High interest costs. These costs are often as high as 30-40% annually.
• Compounding of charges due to late payments and the possibility of penalties.
• Blocking of accounts and legal consequences in extreme cases.
• Long-term perpetual debt buildup that can become difficult to repay.

How current outstanding affect your credit score

Repayment history is a vital factor in determining one's credit score. Delays in payment and rolling over dues every month are clear signals of poor financial health and improper debt management. This can lower your credit score, damage your credit profile, and make future personal loans and credit cards difficult to secure.

How is the current outstanding calculated?

The current outstanding is simply calculated by adding all the unpaid purchases, personal loan EMIs, cash withdrawals, applicable fees (if any), penalties for late payments (if any), and accrued interest on a credit card. It is a reflection of the total real-time debt owned.

Best ways to clear your current outstanding balance

You can clear your current outstanding balance by following the given steps diligently:

1. Always pay the total due; avoid the practice of just making minimum payments.
2. Automate payments and due dates, so that you never miss out on EMIs and bills.
3. Utilise balance transfer or EMIs in case of very large amounts to bring down interest.
4. Ensure that you keep credit utilisation below 30% of your total limit to manage debt.

Why managing your current outstanding is crucial for borrowers

Acknowledging and understanding the ‘current outstanding’ on a credit card is crucial, as it helps cardholders in several different ways:

1. Avoiding interest costs: Paying only the minimum due and permitting the current outstanding to roll forward is never a good idea. This can result in interest costs and often leads to steep finance charges. These charges can even be 30-40% annually if the repayment is not cleared for a very long time. There is also the threat of economic penalties in extreme cases.
2. Maintaining your credit score: If you continuously delay paying your outstanding dues for weeks and months, then such financial behaviour will definitely affect your repayment history. Now, your repayment history is a critical component of your overall credit profile. A clean repayment history helps in maintaining a strong credit score.
3. Managing cash flow: When using a credit card, it is crucial to plan. Properly tracking your outstanding balance, taking notes if needed, to keep things in control, helps keep monthly spending and saving targets in order. This way, your overall cash flow remains strong.

The current outstanding is not a figure on your credit card statement. It is a true reflection of your actual debt. Keeping things simple and clearing this debt in full is the most effective way to avoid high-interest costs, psychological stress, late fees, and long-term credit health.

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