Can You Have a Negative Balance on a Credit Card?

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You may rejoice when you see a negative balance listed on your credit card statement. It's an indication that the credit card issuer owes you money—instead of the reverse. There are a few reasons a negative balance can occur, but a credit in your favor is rarely bad news. Not only do you not have to make a payment, but you could have some money coming to you.

What Can Cause a Negative Balance on Your Credit Card?

When you use your credit card to make a purchase, the total amount borrowed will appear as a positive balance on your credit card statement. A negative balance, on the other hand, will show up as a credit. A minus sign will appear before the number of your current balance, such as -$200.

Negative balances can happen for the following reasons:

  • Fraudulent charge reversal: If someone used your credit card without your permission, the amount charged is not your financial responsibility. Once the fraud is discovered, the credit card issuer will reverse the transaction, which could result in a negative balance.
  • Returned purchase refund: Maybe you bought something with your card but decided not to keep it. In that case, the initial charge on your account would be credited and could result in a negative balance.
  • Overpayment of the bill: If you forgot you already sent in a payment or made a mistake and paid too much, you could end up with a negative balance.
  • Canceled fees: Perhaps you negotiated with the credit card issuer to waive a late fee or other fees. If you already paid off a balance that included those charges, a negative balance will appear on your statement.
  • Statement credit: As a benefit of your rewards credit card, you may earn a cash bonus after making certain charges. The value may appear as a statement credit, so if you were at a zero balance before, the reward will show up as a negative balance.

Does a Negative Balance Affect Your Credit Score?

A negative balance doesn't factor into your payment history, so the issuer won't send that information to the three major credit reporting agencies, Experian, TransUnion and Equifax. Any lender or business that pulls your credit reports will not know that you have a negative balance.

Because credit scoring models such as FICO® and VantageScore® only use the financial data on a credit report to develop a score, negative balances aren't calculated into scores. That said, a negative balance indicates your credit utilization, or the percentage of available credit you're using relative to your credit limit, is at 0% for that card. Credit utilization is one of the most important credit scoring factors, and the lower your balance, the better your utilization—so a negative balance works in your favor.

Additionally, a negative balance has no impact on your credit card's limit. For example, if the limit is $5,000 and the issuer owes you $200, your new credit limit isn't $5,200. You will be able to charge up to the limit plus the negative balance, but your credit limit remains the same.

What to Do If You Have a Negative Balance

There is nothing specific you need to do when you have a negative balance. In fact, your credit card issuer may take care of the issue itself and send you a check for the negative balance amount.

If you choose to, you can simply use your credit card for transactions and the negative balance will be automatically applied to the charges. So if the negative balance is $200 and you charge $300, your current balance will be $100. There's nothing left for you to do—except pay your bill when it comes.

If the amount is substantial, however, you may want to claim it, especially if you need the money for other things. In that case, contact the credit issuer to request a refund. It may send the amount owed to your bank account as a direct deposit, or send you a physical check or money order. You won't have to wait long for the money: According to the terms of the Truth in Lending Act, issuers must refund a negative balance greater than $1 within seven business days of receiving your written request.

If the issuer has a brick and mortar presence, you may even be able to go into a branch and request it be given in cash.

Monitor Your Finances to Stay in the Know

Keeping an eye on your credit card statements so you know what you owe as well as what might be owed to you is always a good idea. So is monitoring your credit report to ensure that everything is accurate. Obtain your free Experian credit report on a regular basis to understand what lenders and other businesses see when they pull your credit report.