What is credit card balance? How to effectively manage and pay off credit card debt

1. What is credit card balance?

Credit card balance is the amount of money that the cardholder has used from the credit limit provided by the bank but has not yet paid. This is the debt the credit card holder must pay at the end of each statement cycle to avoid being charged high interest rates or penalty fees. Credit card balance will usually include total purchases or payment transactions, cash withdrawal fees, interest charged on outstanding debt and may include loans, advances or overdrafts from credit institutions.

Understanding what credit card debt is and methods for managing it will help you effectively take advantage of credit card benefits while avoiding financial risks. In addition, you need to grasp some of the following concepts related to credit card debt:

• Outstanding balance at the end of the period: This is the total amount you've spent or cashed out as of the end of your statement period. If you do not pay this amount in full within the specified time limit, you will be charged interest from the transaction date. When you pay the full balance on time, the balance at the end of the term will be 0.
• Available balance: This is the amount of money left in your credit limit that you can continue to use. Available balance is calculated as credit limit minus current outstanding balance.
• Temporary balance: This is the amount the bank temporarily calculates in case the statement period falls on a holiday or New Year to help you have time to prepare your finances and pay on time, avoiding unwanted fees.

2. Classify credit card balances

According to information from the Vietnam National Credit Information Center (CIC), current credit card debt is classified into 5 groups as follows:

Qualified outstanding balance

Qualified outstanding debts are debts that are still within the payment term, do not have any problems with the recovery of principal and interest, or debts that are overdue but have not exceeded 10 days. Qualified outstanding balances have high recoverability and do not pose a risk to the financial institution or cardholder's reputation.

Outstanding debt needs attention

Outstanding debts that need attention include debts that are overdue for 10 to less than 30 days and debts that need to be restructured for the first time. Outstanding debt that needs attention is an initial signal of the risk of late payment, requiring cardholders to be careful when using credit cards and make a reasonable payment plan.

Outstanding debt below standard

Debts considered substandard include debts that are overdue from 30 to less than 90 days, debts that are restructured for the first time but are overdue for less than 30 days, and debts that the cardholder has interest waived or reduced because the customer cannot afford to pay according to the credit contract. Substandard debt greatly affects credit reputation, making it difficult for customers to access new loans.

Debt balance is doubtful

Suspected outstanding debt is a debt group with signs of high risk, including debts that are overdue from 90 to less than 180 days, debts that need to be restructured for the first time but are overdue for 30 to less than 90 days, and debts that have to be restructured for the second time. This group of outstanding loans often causes credit institutions to carefully consider the ability to recover capital.

Outstanding debt is at risk of capital loss

Outstanding debt at risk of capital loss is a debt group that includes debts that are overdue for more than 180 days, debts that have been restructured for the first time but are still overdue for more than 90 days, and debts that have been restructured for the second or third time but continue to be overdue.

This group of outstanding loans not only causes loss of reputation for customers but also causes large financial losses for credit institutions.

3. How to check credit card balance

When using a credit card, you need to check your balance regularly and pay on time to avoid bad debt and maintain a good credit history. To check your credit card balance, you can apply the following 3 methods:

Check via Internet Banking

• Step 1: Access the bank website or Internet Banking system of the card issuing bank and log in.
• Step 2: Select "Credit card" or "Card account information".
• Step 3: Monitor outstanding debt information, incurred transactions and available balance displayed on the screen.

Check via Mobile Banking

• Step 1: Log in to the Mobile banking application of the card-issuing bank that you have installed on your phone.
• Step 2: Select "Card management" or "Card services" in the home page interface.
• Step 3: Select the credit card you want to view and check the card balance.

Call the hotline of the card-issuing bank

• Step 1: Call the card-issuing bank's hotline during the bank's office hours. This hotline number is usually printed on the back of the credit card.
• Step 2: Provide personal information for authentication.
• Step 3: Monitor credit card balance information, payment due date and other details from bank staff.

4. How to calculate credit card balance

When tracking your credit balance through the bank's electronic system, you can sometimes see your current outstanding balance (the amount of money you have used as of the time you check your account) but it has not been included in the statement period. After the statement period, you can track the exact balance at the end of the period.

However, you can also calculate the ending balance according to the following formula:

Outstanding balance at the end of the period = Outstanding balance at the beginning of the period + Total transactions in the period + Fees and interest - Payments and refunds

In there:

• Outstanding balance at the beginning of the period: This is the amount you owe from the previous statement period that has not been paid.
• Total transactions in the period: Includes all purchases, bill payments, and other transactions that occurred during the current statement period.
• Fees and interest incurred: Includes interest rates on unpaid balances and fees such as annual fees, late payment fees or other costs.
• Payments and Refunds: Record the entire amount you paid during the period and the amount refunded from the bank or sales partner (if any).

For example:

You have a balance at the beginning of the period of 5,000,000 VND, transactions during the period are 2,500,000 VND, payments and refunds are 430,000 VND with interest arising on the unpaid balance of 300,000 VND.

Thus, your credit balance at the end of the period is: 5,000,000 + 2,500,000 + 300,000 - 430,000 = 7,370,000 VND.

4. How to pay credit card balance?

Paying your credit card balance on time not only helps you maintain a good credit score but also avoids unnecessary penalty fees. You can pay off your credit card balance in the following ways:

Pay via the bank's Mobile Banking application

This is the safest and most convenient way to pay off credit card debt. You can pay manually with the amount in your bank account or use the bank's automatic debit feature.

• Manual payment: Log in to the application, select "Card management" or "Card services" in the home page interface. Select the credit card to pay, then click "Pay outstanding balance", enter the payment amount and confirm the transaction.
• Automatic debt deduction: Go to the nearest bank branch/transaction counter or contact the hotline of the card-issuing bank to register for automatic debt deduction service. When using this service, the bank will automatically deduct from your bank account an amount equal to 100% of the outstanding balance for the period or the minimum outstanding balance when the statement is due.

Payment via e-wallet

E-wallets such as MoMo, ZaloPay or VNPay support quick payment of credit card debt. The steps to make payment are as follows:

• Step 1: Open the e-wallet application and the bank's Mobile banking application. Link e-wallet to credit card.
• Step 2: In the e-wallet application, select the items "Bill payment" => "Credit card payment".
• Step 3: Fill in card information, enter the amount to pay and select "Confirm transaction" to complete payment.

Payment via ATM

If you do not use the Mobile banking application or your phone does not have an available Internet connection, you can pay your credit balance at the card-issuing bank's ATMs.

• Step 1: Insert the card into the ATM.
• Step 2: Select "Transfer" or "Credit card payment".
• Step 3: Enter the amount to pay and confirm the transaction.

Payment at the branch/transaction office

In addition to the modern payment methods mentioned above, you can also pay your credit card balance directly at bank branches or transaction counters. You need to bring your credit card and identification when you go to the bank and ask the staff to make the outstanding payment transaction. After that, you just need to pay the amount and receive a confirmation receipt to complete the transaction.

5. Interest rates and fees related to credit card balance

When using a credit card, many people may not clearly understand how interest rates are calculated and the costs incurred when using the card. However, these expenses have a big impact on personal financial situation.

If you do not pay the full balance before due date, you will have to pay quite high interest rates, ranging from 20% - 36% per year, depending on each bank and credit card type. This interest rate is calculated based on the remaining debt balance after the payment term.

Example of interest calculation: Suppose, you have a loan balance of 10 million VND, the applicable interest rate is 2%/month. If you do not pay promptly, the amount of interest per month will be 10,000,000 x 2% = 200,000 VND.

This interest amount will be added to the next month's outstanding balance, leading to an increasing financial burden if not paid on time.

Besides interest rates, other fees related to credit card debt are also quite expensive:

• Late payment penalty: Fees often fluctuate 3% - 6% of total outstanding debt, minimum about 50,000 - 150,000 VND depending on each bank's policy.
• Over-limit spending fee: In case the spending amount exceeds the granted credit limit, you will have to pay an additional fee, usually from 4% to 5% of the amount over this limit.

6. Impact of credit card debt on personal finances

Outstanding credit card debt, if not controlled promptly, can have a significant negative impact on your personal finances. When the outstanding loan balance is not paid on time, the amount of interest accumulated will increase rapidly because of high interest rates. The longer it lasts, the greater the interest burden will be, possibly even exceeding your ability to pay. This causes a serious deficit in monthly spending, causing long-term financial pressure.

Not only that, prolonged outstanding debt can easily put you on the credit system's bad debt list, affecting your personal financial reputation. At this time, your ability to borrow money in the future is also limited because financial institutions will often evaluate your credit score when approving funding. If you have a poor credit score, you may face loan rejection or have to borrow funds at higher interest rates.

Therefore, you need to pay attention to effective debt management to build a stable and sustainable financial foundation.

7. Pay attention when managing credit card debt

To effectively control credit card debt, you need to note the following:

• Control spending and use credit cards appropriately to avoid long-term debt. You should only keep your limit utilization rate below 30% to ensure easy full payment and protect your credit score at a good level.
• Pay your outstanding balance on time to avoid high interest rates and penalty fees. Make sure you always pay at least the minimum amount within the prescribed time or preferably pay the entire outstanding balance to avoid incurring interest.
• Proactively check your debt balance to be able to track spending and make timely adjustments.  Many banks offer notification services via SMS or mobile apps, making it easy and convenient for you to keep track of your transactions and credit card balances.
• Limit cash withdrawals from credit cards because cash withdrawals incur high withdrawal fees and interest rates right from the time of transaction.
• Take advantage of your credit card's interest-free period to pay your expenses and limit your outstanding balances being charged interest or penalty fees. Currently, banks usually provide an interest-free period for credit cards of about 45 - 55 days. 
• Set up a financial management plan and strictly follow it. Determine your monthly spending budget and estimate costs for credit card payments to maintain a stable or no outstanding balance.

8. Effectively control outstanding debt when using SeABank credit cards

SeABank is always the top choice of customers when they need to use credit services in Vietnam. SeABank has issued many lines of credit cards with unique special offers on the market, many refund policies, and attractive promotions for shopping, vacations, and payments. In particular, SeABank also provides many card lines specifically for women and those who love shopping, traveling, and playing golf, accurately meeting customer needs and providing the most optimal experience.

In addition, when using SeABank credit cards, customers also receive support in personal financial management and effective debt control with the following advantages:

• Enjoy interest-free incentives for 45 - 55 days
• Interest rates gradually decrease according to spending limits, and interest rates are calculated on the actual outstanding loan balance, helping to reduce the financial burden on customers.
• Refund annual fees to customers in certain cases, helping to minimize costs when using credit cards.
• Many attractive refunds, discounts, and promotions when using the services of SeABank and its partners.
• Smart spending management through the SeAMobile application is integrated with modern technology, can track credit balances as well as detailed information about transactions and support personal financial planning.

Contact Hotline immediately or go to SeABank's nearest branches/transaction counters for advice on credit card services!

Accurately understanding credit card balance information helps you avoid unwanted fees and maintain a good credit score. Hopefully the above article will help you know how to use credit cards smartly, control spending effectively and make the most of the incentives this tool brings.

To discover more innovative financial products and services, visit the website https://seabank.com.vn or call Hotline 1900.599.952 immediately for timely advice and support.