Current Credit Card Balance Is Negative: What This Means
Understand why your credit card balance is negative, what this unique financial situation signifies, and how to effectively utilize or resolve it.
When your credit card statement displays a negative balance, it indicates that the credit card issuer owes you money. This situation, generally a favorable position for the cardholder, means you have a credit on your account that can be used or refunded.
Understanding a Negative Credit Card Balance
A negative credit card balance means the credit card issuer is holding funds that belong to you. This is the opposite of a typical positive balance, where you owe money to the company for purchases or cash advances. The negative sign preceding the dollar amount on your statement reflects this credit.
From an accounting perspective, a credit card balance represents the net effect of debits (charges) and credits (payments, refunds). When the sum of credits exceeds the sum of debits, a credit balance results. This amount is your money, available for future transactions or refund.
Common Causes of a Negative Balance
Several common scenarios can lead to an account showing a negative balance. One frequent reason is an overpayment, which occurs when a payment exceeds the outstanding balance on the account. This might happen due to an accidental extra digit in a payment amount or a payment made after recent charges have not yet posted.
Another common cause involves returned merchandise or service refunds. If you return an item purchased with your credit card and the refund is processed after you have paid off your balance, the refunded amount will create a negative balance. Similarly, billing errors or duplicate charges that are later corrected can also result in a credit on the account. Promotional credits, such as rewards redemptions applied as a statement credit, or waived fees, can also push an account into a negative balance. Lastly, successful chargebacks or reversals of fraudulent transactions will also result in a credit.
What to Do with a Negative Balance
Upon noticing a negative credit card balance, the initial step is to verify the amount and understand its origin. You can do this by reviewing your online account statements or by contacting your credit card issuer directly. Understanding why the balance is negative can help you decide the best course of action.
One option is to allow the credit to apply to future purchases. The negative balance acts as a credit, reducing the amount you will owe on subsequent transactions. For instance, a -$50 balance means your next $50 in purchases will be covered by the existing credit.
Alternatively, you can request a refund of the negative balance from your issuer. Federal regulations generally require card issuers to refund any credit balance within seven business days of receiving a written request. Even without a specific request, if an unused credit balance remains on an account for more than six months, the issuer is obligated to make a good-faith effort to refund the amount. Refunds can often be issued via check, direct deposit, or money order; contacting the issuer directly can expedite the process. After taking action, monitor your future statements to confirm the credit was correctly applied or the refund processed as expected.