You can have a negative balance on your credit card when your card issuer owes you money. This occurs when you've paid more than what you owe, received a refund, or redeemed rewards as statement credit. It's important to note that a negative balance does not negatively impact your credit score.
Understanding Negative Credit Card Balances
A negative balance on a credit card means that the credit card company owes you money. While it might seem unusual, several situations can lead to this scenario.
Common Causes of a Negative Balance
- Overpaying Your Credit Card Bill: If you accidentally pay more than your total balance due, you will have a negative balance.
- Example: If your bill is $100 and you pay $150, you will have a -$50 balance.
- Receiving a Refund: When you return an item you purchased with your credit card, the refund will appear as a credit on your statement, potentially creating a negative balance.
- Example: You purchase a $200 item and then return it. This will cause a -$200 credit on your card.
- Redeeming Rewards as Statement Credits: Using your credit card rewards (like cash back or points) for a statement credit can also lead to a negative balance if the credit is larger than your current balance.
- Example: You redeem $75 in rewards for a statement credit, but you only owe $50, resulting in a -$25 balance.
Impact on Your Credit Score
A negative credit card balance is not detrimental to your credit score. In fact, it is often seen as a positive sign of responsible credit card use. The reference states that having a negative balance will not affect your credit score. It simply means that you have overpaid your account.
Practical Insights
Here's how to handle a negative balance effectively:
- Leave It: You can leave the negative balance on your account. Your future purchases will deduct from this balance until it reaches zero.
- Request a Refund: You may contact your credit card issuer and request a refund of the negative balance. They may send you a check or deposit the amount into your bank account.
- Use It: As mentioned, your next purchase(s) will deduct from this balance. This is typically the easiest way to handle it.
Summary Table
| Cause | Description | Effect on Balance |
|---|---|---|
| Overpayment | Paying more than your total balance due | Negative |
| Received Refund | Returning a purchase made with your credit card | Negative |
| Rewards Statement Credit | Using your rewards to pay down the balance that exceeds the amount due | Negative |
