Can I Put Extra Money on My Credit Card?

It is possible to pay more than the amount currently owed on a credit card. This can result in a negative balance, meaning the credit card issuer owes the cardholder money. This situation has implications for how the account functions and how funds are handled.

Understanding Your Credit Card Balance

A credit card balance represents the total amount a cardholder owes to their credit card issuer. This balance is dynamic, increasing with new purchases, cash advances, interest charges, and fees, and decreasing with payments and credits.

Two primary terms define a credit card balance: the current balance and the statement balance. The current balance reflects the total amount owed at the present moment, including all posted and pending transactions, and fluctuates daily. In contrast, the statement balance is a fixed amount representing the total owed at the end of a specific billing cycle, listed on the monthly statement. This amount must be paid by the due date to avoid interest charges on new purchases.

Making Payments Exceeding Your Balance

Paying more than your current credit card balance is a process known as overpayment, resulting in a “credit balance” or “negative balance” on your account. Overpayments can occur accidentally, such as a typo during online payment, an additional manual payment when autopay is active, or a refund issued after the balance was paid in full.

Cardholders can make an overpayment using standard payment methods, including online banking portals, the issuer’s website, or phone payments. Some individuals intentionally overpay to pre-pay for a large upcoming expense, simplify budgeting, or as an alternative to carrying cash. However, overpaying does not improve a credit score beyond the effect of a normal full payment, nor does it increase the credit limit.

Managing a Credit Balance

Once a credit card account has a credit balance, the credit card company holds funds belonging to the cardholder. This credit balance is typically managed in two ways. The most common approach is for the credit balance to be automatically applied to future purchases or charges. For example, if a card has a -$100 balance and a $200 purchase is made, the cardholder will then only owe $100. This effectively uses up the credit.

Alternatively, a cardholder can request a refund of the credit balance from the credit card issuer. Refunds may be issued via check, direct deposit, or other methods. Credit card companies are required by law to refund any negative balance over $1. If a written request is made, the issuer must send the amount owed within seven business days. If the credit balance remains untouched for an extended period, such as six months, the company is legally obligated to attempt an automatic refund.