Picture this: You open your credit card statement, and you’re surprised to see you don’t owe any money this month. In fact, you have a negative balance on your credit card. You may assume there is a glitch in the system, but there are several reasons this can happen.
This article explains what a negative balance means on a credit card and how it can occur.
What Is a Negative Balance on a Credit Card?
A negative credit card balance is when the credit card issuer owes the cardholder money instead of the cardholder owing money to the credit company. If you have a negative balance on a credit card, your outstanding balance is below zero.
How Does a Negative Balance Happen?
A negative balance on a credit card usually occurs for one of several reasons, which include:
You Overpaid Your Credit Card Bill
The first reason you may have a negative credit card balance is that you may have overpaid. For example, let’s say you entered a specific payment amount that exceeded the amount due. Or, perhaps if you used autopay to cover your credit card minimum payment but made a manual payment simultaneously, you could end up having a negative balance on a credit card.
You Returned Something You Bought With the Credit Card
If you return an item and the amount of the refund exceeds your current credit card balance, it could result in a credit card negative balance. For example, let’s say you bought a $50 frying pan from your local home supply store. If you paid off your credit card and then decided to return the frying pan, your credit issuer will refund the $50. This refund will now make your new balance -$50, meaning you have a credit card with a negative balance.
You Cashed Out Too Many Rewards
Some credit cards let you redeem your rewards in the form of a statement credit. If you redeem your rewards and also pay off your revolving balance in full, for instance, you could end up with a negative credit card balance.
You Had a Charge Removed from Your Statement
Here’s another example of a scenario that could leave you with a negative balance on a credit card: Let’s say you reported a fraudulent charge on your credit card. If you decide to repay the entire amount without accounting for the fraudulent charge, you could have a negative balance once the charge is reimbursed to your account.
Also, if you had a fee canceled or removed from your account, this could happen as well. This could also happen in the case of a credit card chargeback.
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How to Get Your Money Back From a Negative Balance
If you see a negative credit card balance, it’s not something you necessarily need to worry about. However, if it’s bothering you, there are actions you can take to bring your balance out of the negative.
Here are your options if your credit card balance is negative:
Leave the Balance Alone and Decide Later
If you discover a negative balance on your credit card, you don’t need to take immediate action. Instead, you can just let it be and decide how to move forward at a later time. Because you’re owed money from the credit card issuer, you won’t need to worry about credit card interest accruing.
Use Your Credit Card for Additional Purchases
One of the easiest ways to resolve a negative balance is to make other purchases. Given how credit cards work, spending money on your card can help your balance get back to zero.
For example, if you have a -$100 balance and then make a $100 purchase, your credit card balance will even back out. Then, you don’t have to do anything until you receive another bill, nor will you have to worry about the APR on your credit card.
Get Your Money Back as a Credit Balance Refund
If your negative balance is an amount that’s more than you’re comfortable with or you need the money for other expenses, you can request a refund from the company. To comply with the Truth and Lending Act , credit issuers must refund negative credit card balances that exceed $1 within seven business days of receiving a written request from the cardholder.
You can expect the refund to come in the form of a check, money order, or direct deposit to your bank account. In some cases, you might be able to get a cash refund if the card issuer has a fixed physical location.
Is a Negative Balance a Bad Thing?
A negative credit card balance isn’t a bad thing. However, if you need the funds for other bills, it’s wise to request a refund immediately.
And if you’re concerned, a credit card negative balance could impact your credit score, don’t fret — it won’t. Credit scoring models generally treat negative credit card balances as the equivalent of a $0 balance. In fact, if you have a negative balance, it likely means you’ve been staying on top of paying your balance off each month and are in good standing.
Also, keep in mind that although a negative balance may temporarily allow you to spend beyond your credit card limit due to the addition of the negative funds, it won’t actually increase your limit.
While a credit card negative balance isn’t a bad thing, it’s always wise to keep tabs on your credit card activity. Not only should you monitor what you owe, but you should identify credits or refunds you’re entitled to and factor those in when paying your balance each month. If your balance does end up in the negative, there are steps you can take to bring it back to zero, but you’re also fine to just leave it alone — unless, of course, you need the funds for other things.
For a limited time, new credit card holders† who also sign up for a SoFi Checking and Savings with direct deposit can start earning 3% cash back rewards on all eligible credit card purchases for 365 days*. Offer ends 12/31/22.
Will a negative credit card balance affect my credit?
No, a negative credit card balance will not affect your credit score. This is because credit bureaus consider negative balances as equivalent to a $0 balance.
Can I close my account with a negative balance?
Yes, you can close an account with a negative balance. In most cases, your card issuer will process a refund automatically. If they don’t, you can request one when closing the account.
What do you do with a negative balance on a closed credit card account?
Usually a credit issuer will refund your negative balance before completely closing the account. However, if the credit card is canceled and you lose access to your credit card login, you’ll need to contact your credit issuer to process a refund. You’ll want to take action at least 30 to 60 days after the account is closed.
Photo credit: iStock/filadendron
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