Why Do I Have a Negative Credit Card Balance?

A negative credit card balance can seem confusing at first glance, but it simply means that your credit card issuer owes you money. Instead of you having an outstanding debt, the credit card company has a credit balance in your favor. This situation is the opposite of a typical credit card balance where you owe funds to the issuer for purchases or cash advances.

Understanding Why Your Balance Is Negative

A credit balance can appear on your account for several reasons. One frequent cause is an accidental overpayment, which can happen if you manually pay more than your outstanding balance or if an automated payment processes after you’ve already made a manual one.

Another common reason is receiving a refund or return for a purchase made with the card. If you return an item or receive a credit for a service after you have already paid your bill in full, the refund amount will then create a negative balance on your account. This also applies to reversals of fraudulent charges or waived fees, where a credit is applied after the balance has been settled.

Cashback rewards, promotional credits, or other statement adjustments can also result in a negative balance. For instance, redeeming rewards for a statement credit after clearing your balance can lead to the issuer owing you money.

What a Negative Balance Signifies

A negative balance on your credit card statement indicates that the credit card company holds funds belonging to you. This creates a credit on your account for future transactions. Since you do not have an outstanding debt, no interest charges will accrue on this negative balance.

This credit can be used to cover subsequent purchases made with the card. Any new charges will simply draw down the negative balance until it reaches zero or becomes a positive amount. Credit card companies must refund any remaining credit balance if it stays on the account for over six months, or within seven business days if you request it.

A negative balance has a neutral or temporary positive effect on your credit score. It does not harm your credit score and can briefly lower your credit utilization ratio, a factor in credit scoring. This positive impact on utilization is often temporary as the balance is usually spent down quickly.

Handling a Negative Credit Card Balance

When you notice a negative balance, review your credit card statements and transaction history to understand its origin and confirm the amount. Once confirmed, the simplest approach is to allow future purchases to utilize this credit.

You can continue using your credit card as usual, and the negative balance will automatically be applied to new charges until it is depleted. If you prefer to receive the funds directly, you can request a refund from your credit card issuer. Issuers offer options like direct deposit to your bank account or a mailed check. Federal regulations require the issuer to refund any overpayment of more than $1 within seven business days of a written request.

To help prevent future accidental overpayments, consider setting up automatic payments for only the exact statement balance due each month. Regularly reviewing your account activity can also help you avoid unintended credit balances.