What Is a Negative Balance on a Credit Card Statement?

Introduction

If you aren’t familiar with the term, a negative credit card balance might sound like a bad thing. But it really isn’t.

Maybe you’ve even received a credit card statement with a negative balance or briefly saw your card’s balance dip into the negative in your banking app and everything was fine, right?

But what, exactly, is a negative balance and how does a credit card end up with one? Let’s explore.

What Is a Negative Credit Card Balance?

A negative credit card balance is when your balance is below zero, appearing as a negative amount. It’s not so much negative in the bad sense of the word as it is in the math sense.

In fact, there’s a case for considering it to be a good thing. A negative balance means that your credit card issuer owes you that amount of money instead of the other way around.

Why You Might See a Negative Balance on Your Card

How does a negative balance even happen? There are several reasons to end up with one, and some of the most common are:

Overpaying your credit card bill

If you pay more toward your credit card bill than your current balance, you could end up with a negative balance. For example, maybe you entered the wrong amount or sent an extra payment that month.

Receiving a refund for returned purchases

Getting a refund is another way you could end up with a negative balance. Let’s say you pay off your card’s balance in full, but then receive a refund on an earlier purchase. Your balance will go into the negative.

Getting a statement credit

If you receive some form of statement credit — perhaps from claiming rewards or a promotional offer — and the credit amount is greater than your current balance, you can end up with a negative statement balance.

Having a fee waived

You might end up with a negative balance when a credit card fee is charged to your account and later waived , if that brings your balance below zero. Fees may be waived for a variety of reasons. For example, some issuers may waive annual fees for active-duty military.

Reversing a fraudulent or disputed charge

If your issuer reverses a charge, like after investigating a fraudulent card transaction, that’s another instance where you may end up with a negative balance. If that reversed charge is greater than your current balance, you’ll dip into the negative.

What To Do About a Negative Credit Card Balance

So, what can you do when you have a negative balance on your account? You have a few options!

• Contact your credit card issuer and request it be refunded via check, money order, or direct deposit into a bank account. According to the Truth in Lending Act, issuers must refund the balance within seven business days of receiving your written request.

• Think of your negative balance as a credit for future purchases. You can spend it by purchasing items with your credit card until the negative balance has been exhausted or you have a balance on your account again.

• Do nothing and wait for a refund — as long as your contact information is current, your credit card issuer will eventually send you a refund of the negative balance amount. While credit issuers may have their own policies to send refunds much earlier, the Truth in Lending Act requires them to make a good faith effort to refund any credit balance remaining in an account after six months without any action from you.

What If a Closed Account Has a Negative Balance?

If you have a negative balance on a closed credit card account, you can still receive those funds from your former credit issuer.

The quickest route to get the refund would be to contact the issuer and request it. This will hopefully expedite the process and allow you to ensure the creditor has your latest contact information.

As with an active account, you can also simply do nothing, and the credit issuer is required to return the funds to you after six months. However, the important thing to remember when it comes to the “do nothing and wait” route is that if the card issuer doesn’t have your latest contact information or bank account details — in other words, they don’t know where to send your money — you could lose that money.

Does a Negative Balance Impact Your Credit Score?

If you’re worried about that negative balance, you can rest easy. Carrying a negative credit card balance won’t hurt your credit score.

It can, however, temporarily lower your credit utilization ratio. And that could actually boost your credit score.

Credit utilization measures how much of your available credit you’re using. Experts recommend keeping your utilization below 30% to help your credit score.

A negative balance doesn’t add to your credit utilization, so it can help your ratio in the short term if your statement closes below zero.

Why only in the short term? Because credit card issuers don’t allow negative balances to remain forever. Once the negative balance is used or refunded to you, it won’t affect your utilization anymore.

Does a Negative Balance Increase Your Credit Limit?

On the surface, it might seem like having a negative balance gives you a higher credit limit. But that’s not the case. When your balance is in the negative, your credit limit still remains the same.

Let’s say your card has a credit limit of $2,000. The issuer owes you $200, so your balance is -$200. Your credit limit isn’t $2,200 — it’s still $2,000. It just means you could spend $200 on that card before reaching $0, then spend up to your credit limit from there. While you may temporarily have more available credit to spend, your actual, official credit limit remains the same.

The Bottom Line With Negative Balances

Ultimately, while it may be frustrating to have overpaid a balance, there is nothing to worry about if you see a negative balance on your account.

Not only are negative balances not harmful to your financial well-being, but you also have simple steps to either use the balance to your advantage or have it refunded. A negative balance might even help you temporarily by reducing your credit utilization ratio.

Of course, you can’t rely on a temporary boost like this to build your credit in the long term. If you’re looking for a card to help you build credit, you can compare credit cards and apply online with Credit One Bank.

You can even check if you’re pre-approved to get a better idea of what cards you might be eligible for. It only takes a moment and has no impact on your credit.

FAQs

How do I get my money back if I have a negative balance?

If you want your credit card’s negative balance returned, you can contact your credit card issuer and request a refund via check, money order or direct deposit. By law, issuers must refund you within seven days of receiving your written request.

Can I use my credit card with a negative balance?

If your card has a negative balance, you can simply continue to use the card like usual until the negative balance has been used up.

How do I get rid of a negative balance on my credit card?

If your credit card has a negative balance and you want to get rid of it, you have a few options. You can request a refund by contacting the card issuer, use the card as you normally would until you’ve spent the negative balance, or simply wait until the issuer sends you a refund.

What happens if I overpay my credit card bill?

Overpaying your credit card bill can lead to a negative balance if the amount you pay is greater than the card’s outstanding balance.