What is a negative balance on a credit card?

Do you have a negative balance on your credit card?

Don’t panic! It’s one of those times when a negative could be a good thing. A negative balance on your credit card statement means the issuer owes you money.

There are a number of reasons why you might have a negative balance on a credit card, but most of them involve statement credit in your favor.

In this article, the Clark team will explain some of the reasons why you might have a negative balance on your card and also help you understand your options for using it.


What is a negative balance on a credit card?

On a credit card statement, a negative balance means that the amount the bank or card issuer owes you exceeds the amount of outstanding balance you have for charges you made with the card.

For most people, this is a case where a “negative” is actually a “positive” for your portfolio.

The existence of a negative balance on your credit card statement is usually the result of a credit being applied to your account after you have paid your most recent bill in full.

Let’s look at some of the most common explanations for why you might find your account in this state.

5 Common Reasons You Might Have a Negative Balance

If you have a negative balance on your credit card, it’s likely the result of one of these five cases.

1. Refund issued

Have you purchased something online only to decide to return it after it didn’t fit or didn’t look as good as advertised? Or did you prepay for a service that a company did not provide?

If you used your credit card for these transactions, you may find that the company issued a refund to your payment method.

And if you paid your credit card balance in full between the time you made the purchase and the time you received a refund for the transaction, it could result in a negative balance on your credit card account.

2. Overpayment

If you’re like me, you might be picky about paying your credit card bills in full each month.

This strategy is likely to ensure that you never owe a penny of interest on your charges, but it leaves open the possibility of sending more than you were required to pay.

Let’s say you sent $902 to cover what you thought was your full bill, but an adjustment in one of your charges dropped the actual amount owed to $895. This would leave you with a “negative balance” of $7, which just means you’ve sent a few more dollars than necessary to cover things.

3. Credit Card Rewards

If you have a credit card with an active welcome bonus offer or cashback program, you may have a negative balance on your account because your card issuer gave you the rewards in the form of credit. raised.

For example, if you get a welcome bonus of $300 for spending $3,000 in the first three months of owning the card (or something similar), you might find that a credit $300 statement was issued to your account in the fourth or five months after you successfully hit the spending requirement.

Similarly, a card issuer may distribute your cash back earned on spending with the card through additional statement credits. Some cards will do this once you’ve earned $25 in cash back.

4. Fraudulent charges refunded

If your credit card information has recently been compromised in a data breach or if the card has been stolen, it’s possible that some charges that you didn’t actually incur could affect your account.

In most cases, you should be able to dispute these charges before you have to pay them.

But you may receive refunds in the form of statement credits if you paid a bill for a charge that was later found to be fraudulent.

5. Expenses waived or refunded

Have you disputed late fees or have you recently been charged an annual fee, balance transfer fee, cash advance fee or other?

Although most of the time these charges are valid and non-refundable, you may find that you received a statement credit that sent your balance to “negative” if the card issuer discovered that they had charged you the one of these charges by mistake.

This explanation is unusual, so you may want to check with your card issuer that your negative balance is correct before assuming that the credit on your account is actually yours.

What to do if you have a negative credit card balance

If you find yourself with a negative credit card balance, there are a few options for your next steps.

1. Contact customer service with questions

If you’re unsure if your credit card statement balance is correct, the safest thing to do next is to contact your issuer’s customer service department to make sure you’re on the same page.

This will give you confidence that the credit shown in your account is valid and you can then make plans to spend or recover the money.

If you find out the credit is wrong, you’ll have saved yourself the headache of potentially owing more money than expected on your next credit card bill.

2. Just keep spending with the card

If you’re sure the negative balance on your statement is correct, you don’t have to do anything but continue to use the card as you normally do.

The card issuer will use the credit displayed on your account to offset future charges.

For example, if you had a negative balance of $100 and spent $150 with the card in the next billing cycle, you would receive an invoice stating that you only owed $50.

3. Explore options for getting money sent to you

Although most people will accept the path described in #2 above, there are a few cases where it may not work.

If you don’t use the card often or are planning to close the account, you may not want a large amount of negative money left on the card. It’s understandable.

You can request that the money be sent to you. The card issuer may be able to send it directly to the bank account you linked to the card for payment, or you can request a refund by check.

3 common questions about negative credit card balances

Although a negative credit card balance is actually a fairly simple situation to resolve, consumers still have understandable questions about the process.

Let’s answer a few of them.

Can this negatively impact your credit score?

Having a negative balance on your credit card should not have a negative impact on your credit score. And in fact, there is a chance that it could help your score.

Credit usage can represent up to 30% of your credit score. Having a negative balance on your account reduces your use of available credit on that line of credit.

Does this mean your credit limit is higher?

A negative balance on your credit card does not affect your card’s credit limit. However, it may give you a temporary increase in purchasing power with this card.

For example, if you have a credit limit of $10,000 and a negative balance of $500 on your credit card, your purchasing power is actually $10,500 thanks to the $500 that the card issuer owes you. But you still can’t reach a balance that takes you to from over $10,000.

What happens if I close a credit card with a negative balance?

This means that the card issuer will owe you money when the account is closed. So you’ll want to be in communication with the issuer to make sure you get your money back and have it transferred to you the way you want. The most common means are by bank transfer or cheque.

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