What Is a Negative Balance on a Credit Card?

A credit card balance represents the money a cardholder owes to the credit card issuer. This balance increases with spending and decreases with payments. While most people are familiar with owing money on their credit cards, a less common, but equally important, concept is a negative balance.

Understanding a Negative Balance

A negative balance indicates that the credit card company owes money to the cardholder, rather than the cardholder owing the company. It is essentially a credit in the cardholder’s favor, meaning the account has a surplus of funds. This appears with a minus sign in front of the dollar amount on a credit card statement or online account, such as -$50. This situation differs from a zero balance, where neither party owes the other, and a positive balance, which signifies the amount the cardholder owes to the issuer. A negative balance acts like a temporary credit that can be applied to future purchases. It is not a debt but rather an overpayment or credit that the issuer needs to return or apply.

Common Causes of a Negative Balance

Overpayments

One frequent cause is an overpayment, which occurs when a cardholder pays more than the outstanding balance on their account. This might happen accidentally, such as when manually entering a payment amount exceeding the current debt, or if an automated payment processes after a manual payment has already cleared.

Returns and Refunds

Another common reason is when returns or refunds exceed the current balance. If a cardholder returns an item purchased with the credit card and a refund is issued after the original purchase has already been paid off, the refund amount will then create a negative balance. For example, if a $50 item is refunded to a card with a zero balance, the account will show -$50.

Statement Credits and Errors

Statement credits or rewards can also result in a negative balance. These include cashback rewards, promotional credits, or other non-purchase credits applied directly to the account. If the credit amount is greater than any existing outstanding balance, it can push the account into a negative status. This is particularly common if a statement credit is issued after the cardholder has already paid their monthly bill in full. Less commonly, a billing error in the card issuer’s favor, such as an accidental credit, could also lead to a negative balance.

Managing a Negative Balance

When a negative balance appears on a credit card statement, it typically acts as a credit that will automatically apply to future purchases made on that card. This is often the simplest way to resolve the negative balance, as subsequent transactions will reduce the credit until the balance returns to zero or becomes positive.

Cardholders also have the option to request a refund from the credit card issuer for the negative balance. This can usually be done by contacting customer service, and the refund may be issued via check, direct deposit, or money order. According to federal law, if a negative balance is over $1 and a written request is made, the credit card company must issue the refund within seven business days.

A negative balance generally does not harm a credit score. Credit scoring models focus on factors like payment history and credit utilization, and an overpayment or credit balance is not typically reported negatively to credit bureaus. Regularly checking credit card statements allows cardholders to monitor their balances and identify any negative amounts, ensuring they can decide how to manage the credit.