Key Takeaways
- The outstanding balance on a credit card encompasses purchases, cash advances, fees, and interest.
- Properly managing this balance is essential for maintaining good financial health and a strong credit score.
- High balances can cause financial strain, hurt your credit score, lead to debt accumulation, and increase overall debt due to interest.
- Key management tips include monitoring statements, budgeting, paying more than the minimum on time, and seeking financial advice if needed.
‘What is outstanding balance in credit card in Malaysia?’ is a question many individuals face when navigating the complexities of managing their credit finances.
In Malaysia, as in many other parts of the world, credit cards are a common financial tool used for various transactions ranging from everyday purchases to emergency expenditures.
However, with the convenience of credit cards comes the responsibility of managing the outstanding balance, a crucial aspect of credit card ownership that impacts financial health and creditworthiness.
This article aims to demystify what is outstanding balance in credit card in Malaysia, explaining its significance, how it’s calculated, and more.
What is Outstanding Balance in Credit Card in Malaysia?
A credit card’s outstanding balance is the total debt owed to the credit card issuer at any given time.
This balance is a cumulative figure that includes all charges made to the card, including:
- Purchases: Expenses incurred through retail transactions, online shopping, and bill payments using the credit card.
- Cash Advances: Cash withdrawn against the credit card’s limit, usually from ATMs or through over-the-counter transactions.
- Balance Transfers: Amounts transferred from other credit card accounts to consolidate debt or take advantage of promotional interest rates.
- Fees: Charges imposed by the issuer, such as annual fees, late payment fees, cash advance fees, or foreign transaction fees.
- Accrued Interest: Interest that accumulates on any unpaid balance, calculated based on the card’s Annual Percentage Rate (APR).
Calculating the outstanding balance involves summing up these components, reflecting the total debt owed, excluding any payments made towards the account.
Why is it Important to Manage Your Credit Card’s Outstanding Balance?
Understanding and managing the outstanding balance is vital for several reasons:
- It indicates the cardholder’s financial liability and helps determine the minimum payment due.
- It affects the credit utilisation ratio, a key factor in credit scoring, where a lower balance relative to the credit limit is generally better for credit health.
- Regularly paying down the outstanding balance can improve financial well-being and creditworthiness.
Moreover, cardholders are required to make at least the minimum payment on the outstanding balance by the due date specified in the credit card statement.
Failure to do so can lead to the accrual of additional interest charges, imposition of late payment fees, and potential negative impacts on the cardholder’s credit score.
What are the Implications of a High Outstanding Balance in Malaysia
1. Financial Strain
High outstanding balances can lead to significant financial strain, making it difficult for cardholders to manage minimum payments and interest charges.
This strain can escalate into stress and anxiety over debt management, impacting overall well-being.
2. Negative Impact on Credit Score
A high outstanding balance can adversely affect your credit score. It increases the credit utilisation ratio, potentially making it harder to obtain loans or favourable interest rates in the future.
3. Debt Accumulation
As interest compounds on unpaid balances, it becomes increasingly challenging to make any significant dent in the debt, trapping cardholders in a revolving debt cycle.
4. Increase in Total Amount Owed
The total amount owed can quickly escalate as interest accumulates on the outstanding balance, making the debt increasingly overwhelming and difficult to pay off in full.
5. Late Payment Fees
Missed or delayed payments on outstanding balances result in late payment fees, adding to the financial burden and complicating the debt repayment process.
Read More: How to Apply Personal Loan for Bad Credit in Malaysia
How to Manage Outstanding Balance in Credit Cards in Malaysia
Managing the outstanding balance on credit cards is vital for maintaining financial health and avoiding the pitfalls of debt in Malaysia.
Here are some strategic approaches to effectively manage your credit card debt in Malaysia:
1. Regular Monitoring
Monitor your credit card statements regularly to stay updated on your balances, transactions, and due dates.
Vigilance helps in identifying any errors or unauthorised charges early, allowing for timely resolution with your issuer.
2. Create a Budget
Draft a comprehensive budget that details your income and expenditures, including allocations for credit card payments.
This financial blueprint ensures you have designated funds to cover your card balances each month.
3. Pay On Time
Timely payments are crucial to avoid late fees, additional interest, and potential dings to your credit score.
Consider setting up automatic payments or reminders to ensure deadlines are met without fail.
4. Pay More Than the Minimum
Whenever feasible, exceed the minimum payment on your bills. This practice not only reduces your balance quicker but also decreases the total interest accumulated over time.
5. Prioritise High-Interest Balances
If juggling multiple credit cards, focus on clearing the ones with the highest interest rates first.
Channelling extra payments towards these balances can significantly cut down on interest costs and accelerate debt repayment.
6. Avoid Cash Advances
Steer clear of using your credit card for cash advances due to their typically higher interest rates and fees.
Opt for alternative cash sources, such as direct withdrawals from your bank account, to avoid these additional charges.
7. Limit Credit Card Usage
Exercise restraint in using your credit cards, especially for non-essential or impulse purchases that can inflate your balance.
Adhere to your budget, using your card only for planned expenses that you’re confident you can fully pay off each billing cycle.
8. Negotiate with Creditors
Should you find yourself struggling to manage your balances, don’t hesitate to engage with your credit card issuers for possible solutions.
Many are open to negotiating more favourable terms, such as reduced interest rates or tailored repayment plans, to facilitate easier debt management.
9. Seek Financial Counselling
Lastly, in cases where debt becomes overwhelming, it might be wise to seek advice from a financial counsellor or advisor.
These professionals can offer tailored strategies and support, guiding you towards effective debt management and financial stability.
Read More: Personal Loan Malaysia: All You Need to Know Before Applying
How Bluebricks Can Help with Outstanding Credit Card Balances in Malaysia
Bluebricks is a trusted bank loan and debt consolidation agency in Malaysia, helping borrowers effectively manage and consolidate their debts, including those from credit cards.
We also provide a broad spectrum of loan services tailored to meet diverse needs, including:
- Personal loan services
- SME loan services
- Mortgage loan services (for buying a new home, refinancing and cashback purposes)
- Collateral loan services
Trusted Loan Consultancy Services
At Bluebricks, we understand that every financial situation is unique. Our loan consultancy service is geared towards offering personalised advice and recommendations, taking into consideration various factors like:
- The specific loan amount you require.
- The urgency with which the loan amount is needed.
- Whether you or your parents own a property that has been held for over ten years.
- Your income level.
- Your CTOS score (such as your credit score and credit history).
Why Bluebricks
1. One of the Top 10 Leading Loan Agencies in Malaysia
Our loan agents represent both individuals and businesses, offering technical and financial advice to help secure loan approvals. Even if banks have previously rejected you, we provide access to a broad spectrum of loan options. Our aim is to enhance the success rate of your loan applications and minimise rejections.
2. Over 10 Years of Experience
With over a decade of experience and current banking knowledge, we excel in securing personal, business, mortgage, and collateral loans, navigating challenges like CTOS/CCRIS, and guiding clients confidently towards successful loan approvals.
3. One-Stop Solution
We provide a one-stop loan service, compiling various options from banks and credit institutions for you. Simply submit your income statement, assets, liabilities, employment record, and credit history, and we’ll handle the collateral and documentation to streamline your loan approval process.
4. Full Financing with 100% Bank Loans
We ensure 100% bank loan availability to provide full financial support, making it easier to achieve your goals and build a positive credit history.
5. No Upfront Payment Required
Our no upfront payment policy is designed to ease your financial journey, allowing you to start your investment without initial costs, reducing immediate burden and demonstrating our commitment to your satisfaction and trust.
What is Outstanding Balance in Credit Card – FAQs
Understanding your credit card’s outstanding balance is crucial, yet it can be confusing.
To help clear up any questions, we’ve put together a set of FAQs on what is outstanding balance in credit cards in Malaysia.
The outstanding balance on a credit card is the total amount owed, including purchases, fees, and interest. It changes with each transaction and affects your available credit.
The amount due, however, is the minimum payment required by the due date to keep the account in good standing, typically a portion of the outstanding balance plus any fees and interest.
Not paying your credit card balance in full each month is technically possible as long as you meet the minimum payment requirement set by your credit card issuer.
However, there are several important factors to consider before choosing to carry a balance:
– Interest Charges: Carrying a balance on your credit card means you’ll likely incur interest charges on the unpaid portion, which adds to the total amount you owe over time.
– Credit Score Impact: Regularly not paying off your balance in full can affect your credit utilisation ratio, which is the amount of credit you’re using compared to your credit limit.
– Debt Accumulation: Continuously carrying a balance can lead to debt accumulation, making it harder to pay off the balance in the future, especially if you continue to make new charges on the card.
It’s generally advisable to pay off your credit card balance in full each month, as carrying any balance doesn’t offer advantages to your credit score.
Maintaining low credit utilisation (below 30% of your total credit limit) is recommended for a healthy credit score, but this doesn’t necessitate carrying a balance from month to month.
