What Is a Negative Balance on a Credit Card?

A credit card balance typically represents the amount of money a cardholder owes to the credit card issuer for purchases and other transactions. This balance increases with new spending and decreases with payments. However, in certain situations, a credit card account can display an unusual state known as a “negative balance,” meaning the credit card company owes money to the cardholder.

Understanding a Negative Balance

A negative balance on a credit card signifies that the cardholder has more credit available than they currently owe, or that the credit card company holds funds on their behalf. On a credit card statement, a negative balance typically appears as a number with a minus sign in front of it (e.g., -$50).

Common Causes of a Negative Balance

Several common scenarios can lead to a credit card account having a negative balance. One frequent cause is an accidental overpayment. This can occur if a cardholder manually enters an amount greater than what is due or if automated payments coincide with manual ones.

Another common reason is when a return or refund is processed for an item originally purchased with the card. Successful disputes of charges, such as fraudulent transactions, can also result in a negative balance if the cardholder had already paid the disputed amount. When the charge is reversed, a credit is applied.

Additionally, credit card issuers may apply promotional credits or cash-back rewards directly to the account balance. If these credits exceed the current outstanding balance, they will lead to a negative balance. Waived fees, like interest charges or annual fees, can also contribute to a negative balance if the amount was already paid.

Resolving or Using a Negative Balance

When a credit card account shows a negative balance, cardholders have several options for managing these funds. The most straightforward approach is to simply use the credit for future purchases. Any new charges made on the card will automatically offset the negative balance until the credit is fully utilized. This method requires no direct action and effectively reduces the amount owed on subsequent statements.

For larger negative balances, or if the cardholder prefers to have the funds directly, it is possible to request a refund from the credit card company. Issuers typically offer options such as sending a check or initiating a direct deposit to a linked bank account. While the Truth in Lending Act generally requires issuers to refund negative balances over $1 within a reasonable timeframe upon request, contacting customer service or submitting a written request can expedite the process, often resulting in a refund within seven business days. Some cardholders may also choose to leave small credit balances on the account, allowing them to be absorbed by future transactions without requiring immediate action.