Q:

What is a credit card balance?

A:

Quick Answer

A credit card balance refers to the amount of money the credit card holder owes to the credit card issuer, according to Investopedia. Maintaining a low credit card balance relative to the amount of available credit is a fundamental factor in determining the holder's credit score, notes About.com.

Continue Reading

Full Answer

The credit card balance represents the amount of credit used plus any associated interest and maintenance obligations. The credit card balance – the amount owed on a specific credit card – is subject to interest. A higher balance therefore requires an increased interest obligation and a higher monthly minimum payment amount. A credit card balance can be zero if the holder has not used the card or has paid it in full. Cards that have exceeded limits result in negative balances.

Payments must be made on the credit card balance – in increments or in full – by the holder every month on or before the scheduled payment date. If the holder fails to make a payment toward the balance or pays late, the company may apply late fees, charge-offs or other similar penalties that damage the holder's credit score.

To retain a suitable credit score, an individual should keep his balance at 30 percent or less of the available credit, notes About.com.

Learn more about Credit & Lending

Related Questions

Explore