If you checked your card and found a negative balance on it, you may be worried. At first, you may think that you did something wrong, which resulted in that negative balance.
Still, there’s more to it and we’re here to tell you what a negative balance on a credit card means.
- Can You Have a Negative Balance on a Credit Card?
- Where Does a Negative Credit Card Balance Come From?
- Is a Negative Balance Bad?
- How to Get Your Money Back from a Negative Balance
- Read More
- The Bottom Line
Can You Have a Negative Balance on a Credit Card?
Having a negative balance on your credit card is possible. However, it’s not some sort of scam, and you didn’t necessarily do anything wrong. What it means is that the company that issued your credit card owes you money.
Usually, you are the one who owes money to the credit card issuer, so this situation will feel odd. Still, you shouldn’t panic because it’s a good thing.
Where Does a Negative Credit Card Balance Come From?
As mentioned earlier, a negative balance on a credit card appears when you don’t owe money to the credit card company, but they owe you money instead. So, just because there is a negative balance, it doesn’t mean you made some severe mistake that will follow you for the rest of your life. Of course, sometimes it may be the result of an error, but it’s not always the case.
What causes negative balance, though? Here are some reasons:
You Got Too Many Rewards
People who have cash-back rewards on their credit cards might want to use these rewards as statement credits. If you’re one of them, maybe you applied too many rewards to the balance, which in return creates a negative credit. This is the same as using a check and overpaying your credit.
You Returned an Item Purchased with the Card
Did you buy something using your credit card, finished paying off the balance, and then returned the product? Perhaps the item was defective, or you realized it didn’t meet your expectations, so you gave it back to the seller. Well, considering the balance was already paid off, the return is going to generate a negative statement balance as it hits your credit. For example, if you bought a toaster for $70, paid off the amount using your credit card, and then returned it because it was defective, you would have a -$70 balance on your credit card.
Your Credit Card Bill Was Overpaid
If you overpaid your credit card bill, this could create a negative balance as well. It is actually one of the most common causes of negative balances. You paid back more than you owed, and now the credit card issuer owes you that extra amount.
This is very unlikely to happen when you make the payments online. Usually, the card issuer will make sure you don’t pay over the credit card balance that you owe.
In other situations, you may use the online bill of the bank account to write a check in order to pay your credit card. When this happens, the card issuer is going to accept the extra amount, and then post the negative balance on your statement.
So, if the amount you owed was $200 and you sent them $250, the balance would be -$50 on the next statement you receive.
Is a Negative Balance Bad?
One concern pops up in the mind of anyone who sees a negative balance for the first time: is it bad? Do you have to fix the balance as soon as possible, or you can leave it like that? Moreover, will your credit rating be affected by this?
As we mentioned earlier, having a negative balance is not a tragedy. It’s not going to hurt you. Of course, it isn’t too beneficial for your credit score, but that doesn’t mean it will affect you for the rest of your life.
When you have a negative balance, it is reported as a zero balance to the credit reporting agencies. So, there isn’t any need to worry in this regard. If you want to improve your credit rating or start building it, then you should know that a negative balance will have the same effect as a zero balance. It’s not the best, but it doesn’t cause any harm either.
Now, there are some things you may want to be wary of. For example, if you have a big amount of money in negative balance form, you may not be able to access it easily. You may require money and rely on the extra money from your credit card, but accessing it is not free of challenges. Thus, it is not the best situation to be in. You will not be able to build wealth or get interest either.
If you want to make sure you don’t keep that negative balance there for too long, what you can do is put all that amount in a high-yield online savings account. You can also consider a certificate of deposit, or putting that money in a separate account where it will help you meet your financial aims for the longer term.
How to Get Your Money Back from a Negative Balance
Did some negative balance accumulate on your credit card? Don’t panic – you can fix it. Below are some methods you can use to get the money back:
Make Additional Purchases
If you don’t have a big negative balance, you can use the credit card to make an additional purchase. For example, you can buy something you need, or you can simply spend that money while grocery shopping. Your balance will go back to zero as soon as you make purchases that equal the negative balance amount.
The only consideration here is to spend only the exact negative balance, and don’t go over it. It would only create additional debt and even make you risk paying the amount back later than you should.
Decide What to Do Later
Fixing the negative balance on your card is not urgent. If you don’t know what to do with it just yet, you can leave it and return to it later. Several months with a negative balance is not going to cause any harm. It’s also a good option if you want to save some money and you are struggling in this area. If you don’t do anything with the balance within six months, the card issuer is obliged to refund the amount to you.
Get a Credit Balance Refund
You can also ask the card issuer for a credit balance refund if you don’t want to just leave the amount there. This will allow you to be in direct control of the funds, so you don’t spend the money from the card. All you have to do is call the company and speak to their customer service, and tell them what you want to do. If you give all the details, the issuer will be able to refund you all the negative balance.
Read More
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- Where to Get a Cashier’s Check Without a Bank Account
- How to Close Chase Account
- How To Sign Over a Check
- How to Close Bank of America Account
- What is the Chase ATM Withdrawal Limit?
The Bottom Line
Having a negative balance on a credit card is not the worst thing. It means that the credit card issuer owes you money and you can use those funds for savings and other purchases. We hope our article sheds some light on this matter.
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Frank Gogol
I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.