What does a negative balance mean on a credit card?

Written by
Choncé Maddox
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Checking your credit card balance regularly is a positive financial habit that can help you stay on top of what you owe. But what if your credit card account shows a negative balance? A negative credit card balance can show up on your credit card statement under certain circumstances, but fortunately, it’s nothing to worry about.

That said, while it may not be common, it’s important to know how to handle a negative balance and resolve it if possible with your card issuer.

What does it mean if my current balance on a credit card is negative?

A negative balance on a credit card arises when the available amount of credit on a card exceeds the cardholder’s debt. This can happen for several reasons, such as if you overpaid your bills, receive a credit for a returned purchase or if the credit card company is compensating for previous mistakes or service failures.

For example, when you return an item you purchased using your credit card, the merchant may issue a refund to your card. If the refunded amount exceeds your outstanding balance, you’ll end up with a negative balance.

Don’t lose sight of a negative balance, especially in the context of your overall month-to-month finances because ultimately this is your money to use.

Other reasons why you might end up with a negative credit card balance

There are several other reasons why you may end up with a negative credit card balance, including:

  • Overpayment: Sometimes people accidentally overpay their credit card bill. This can happen due to calculation errors or misreading the total amount you owe. Most credit card dashboards show your total balance for the previous months’ statement, but this may not be the current balance if you’ve made extra payments in the meantime before your next payment was due.
  • Credit card rewards: Some card issuers offer cash-back rewards for certain purchases and you can redeem cash back as a statement credit. If you’ve recently paid your credit card bill down to zero or have a small balance left and the statement credit exceeds that amount, you could end up with a negative balance.
  • Balance transfer credits: When you transfer your credit card balance to a new card, you’ll want to watch the timing of your last payment on your old credit card. If you have autopay set up, for example, and end up making a credit card payment while transferring that same balance amount shortly after, you may overpay and get a negative balance.
  • Disputes and chargebacks: If you successfully dispute a charge with your credit card issuer and they issue a chargeback in your favor, the disputed amount may be credited back to your account, resulting in a negative balance if it exceeds your outstanding balance.
  • Adjustments and corrections: Sometimes, credit card companies may issue adjustments or corrections to your account, which can lead to a negative balance.

In all these examples, the credit card issuer owes you money and you have the option to use the negative balance to offset future purchases.

Can a negative credit card balance affect your credit score?

A negative credit card balance is not bad for your credit score and should have no impact on it. It may be interpreted as a $0 balance which won’t affect common factors that influence your credit score like payment history, credit utilization rate, and average age of accounts.

What to do about a negative balance on a credit card?

It’s best to start by verifying that the negative balance is indeed legitimate and not the result of an error. Check to see if the negative amount matches your transaction history when it comes to any returns, overpayments, or resolved disputes.

Next, you should consider whether you want to keep a negative credit card balance for a short while to offset future purchases and charges or if you prefer to receive a refund to get the balance back to $0.

If you have bills that you pay automatically with your credit card or other upcoming expenses, it may be easier to just offset those costs with a new purchase. So if you have a negative balance of -$30 and you make a $50 purchase, your new credit card balance will be $20.

When a larger negative balance exists or you’re looking to stop using or close the credit card soon, you may want to request a refund from the credit card company in the form of a check or direct deposit to your checking account.

According to the Truth in Lending Act, card issuers must refund any negative balance over $1 within a reasonable timeframe, so your credit card company may already be working to send the money to you. But to speed up the process, you can always call the company or send an email to the customer service or help desk team.

How to handle a negative balance on a closed credit card account

You may be wondering how to handle this situation with a closed credit card account. In some cases, a credit card account may have a negative balance even after it’s been closed. In this case, the credit card issuer will typically send a check for the overpaid amount or transfer it to another open account if one exists.

Communicate with the credit card company and monitor the status of your refund to ensure you get the money back in a reasonable timeframe.

Final thoughts

A negative balance on your credit card may sound like a bad thing, but it’s a normal result that can be due to a variety of scenarios. Understanding how and why it happens will give you a clearer picture of your financial standing, and knowledge of its effects on your credit score can put your mind at ease.

Be sure to review your credit card statements regularly, keep an eye on your total balance, and communicate with your card issuer when necessary. Using a credit card wisely by keeping your balance low can help you qualify for some of the best credit cards on the market.  

Choncé Maddox
Cardratings Contributor

Choncé is a personal finance freelance writer who enjoys writing about credit cards, business loans, debt management, and helping people achieve financial wellness. Having a background in journalism, she decided to enter the world of content writing in 2013 after noticing many publications transitioning to...Read more

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