Everything You Need to Know About a Negative Credit Card Balance
Don’t panic — there are a few reasons why your balance may show as negative, but at the end of the day, it’s most likely a good thing for you. Here’s why…
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How is My Credit Card Balance Calculated?
A credit card balance is the amount you owe on your account to the credit card issuer. The balance is calculated by adding up your purchases, unpaid balances, interest charges, and any fees incurred during the billing cycle.
How Will My Balance Appear on My Statement?
- If you owe money to the credit card company, the balance will be a positive number.
- If you do not owe any money or paid the exact amount owed your balance will be zero.
- If you overpaid your bill or were issued a credit after you already paid your bill, your credit card statement will show a negative balance. A negative balance is indicated by a negative number or a number with parenthesis around it.
Reasons for Negative Credit Card Balances
There are a few common scenarios that result in your credit card balance showing up as negative:
- You may have credits applied to your account when you make an overpayment on your account, i.e., paying more than your previous statement balance.
- Some cash back rewards cards automatically apply your cash back as a statement credit, while others require you to redeem cash back rewards for statement credits. Either way, if you rewards exceed your balance in a given period, your credit card balance will show as negative.
- You returned something to a store and the return was processed by your credit card company after the billing period closed.
- You receive some other type of refund, such as fraudulent charges or refunded credit card fees.
A common reason for cardholders to overpay their balance is that their credit card balance may vary from day to day. For example, if you have a statement balance of $1000, pay $1000, and then are issued a credit of $200 for a returned item, you will have a $200 credit balance, shown on your statement as -$200 or ($200).
If you know that a credit will be applied to your account, or a store return will be processed around the time you plan to pay your bill, you can avoid overpaying by checking your current balance online or over the phone to determine whether the credit has been processed.
What Should You Do About a Negative Balance?
You have two options here. First, you can leave it in your account and it will be applied as a credit towards future purchases, which if you plan on continuing to use your card is the easiest option.
Pro Tip: A negative balance does not mean a higher spending limit!
While it may be a nice surprise for your current month’s budget, your credit limit remains the same as it was before.
Your second option is to request a refund from your credit card company, which will require calling the number on the back of your credit card. Some banks may require a written request, and once they receive that, the law states that they have 7 business days to send you a refund check.
How Long Will a Negative Balance Remain on My Account?
A negative balance remains as a credit on your account until:
- You charge an amount that offsets the credit, or
- The credit card company sends you a check for the credit
Will a Negative Balance Affect My Credit Score?
Technically, yes, as it reduces your credit utilization by the amount that you’re negative, and as we all know, maintaining low credit utilization is key to keeping your credit score high. That said, negative balances are typically small and resolved relatively quickly, so it won’t have a lasting effect on your credit score.