One of the best things about using a credit card is the flexibility it offers—you can buy goods or services and decide how much and when to pay once the bill arrives. For instance, if you buy an item worth Rp500,000 using your Honest credit card, you can choose to pay Rp300,000 or Rp400,000 at the end of the month. The remaining balance can be paid the following month when you have more funds.

However, leaving an outstanding balance unpaid for too long is not a good idea. Outstanding balances on your credit card will continue to accrue interest, which can harm your financial health in the future.

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What Is Outstanding Balance?

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The term "outstanding balance" refers to the unpaid balance on your credit card. Simply put, it’s the portion of your credit card bill that you haven’t paid off because you chose to pay only part of it.

For example, if you buy a pair of shoes for Rp500.000 using your Honest Credit Card but only pay Rp300.000 at the end of the month, your outstanding balance is Rp200.000 (Rp500.000 - Rp300.000).

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How Outstanding Balance Affects Your Credit Score

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Paying only the minimum amount on your credit card might seem convenient since it doesn’t require a large cash outflow. However, it can negatively impact your credit score and financial health in the long run. Here’s how outstanding balance affects your credit score, credit limit, and overall financial condition:

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1. Interest accrual

Did you know that if you pay your credit card bill in full and on time (or within the grace period), you won’t be charged any interest? Conversely, if you have an unpaid credit card balance beyond this period, interest will be applied.

Similar to other loans, this interest is compounding—meaning it accumulates over time, and the longer you delay payment, the more it grows.

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2. Financial burden

The growing interest can gradually become a significant financial burden. This means more of your monthly income will go toward paying off your credit card bills. And if you keep using your card to make additional purchases, the installments will only get bigger, adding to your financial strain.

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3. Reduced credit limit

Every bank sets a maximum credit limit for cardholders to prevent overspending. The remaining limit you have available depends on your outstanding balance.

For instance, in January 2024, you have a credit card limit of Rp10.000.000. You use Rp3.000.000 to buy a fancy sweater at the mall. By the end of the billing period, you pay only Rp1.000.000 toward that sweater, leaving an outstanding balance of Rp2.000.000.

As a result, you won’t have the full Rp10.000.000 available for use next month. Instead, your available credit will be less than Rp8.000.000 (Rp10.000.000 minus the Rp2.000.000 balance and other fees).

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4. Lower credit score

A high outstanding balance can negatively impact your credit score. Banks might see you as someone who frequently uses a credit card but doesn’t pay off the balance in full and on time. This can make them hesitant to approve new loans for you.

For example, suppose you have a credit card limit of Rp10.000.000 in 2023 and repeatedly max out your card throughout the year, leaving an outstanding balance of Rp9.000.000—or 90% of your limit.

Such a high outstanding balance can make banks wary of lending to you again. They might worry that you won’t be able to repay additional loans, given your already high credit obligations.

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To ensure your credit score doesn’t suffer due to a high outstanding balance, consider using the Honest credit card. This card comes with the Honest App feature, which records all your spending history, helping you know when to stop using your card. With a generous limit of up to Rp100.000.000, you won’t need to stress even if your outstanding balance is slightly higher.

Not only that, Honest has simplified its fees to just one type, which adjusts based on your bill amount, and there’s no annual fee. This makes it easier for you to calculate how much of your credit is used and how much limit you have left. With the Honest Credit Card, shopping—whether online or offline—becomes easier and more practical.