Negative Balance on a Credit Card: How It Happens and What to Do

So, you got your credit card statement in the mail and ripped it open, expecting either a $0 balance or that you owe money. Instead, you find there is a negative balance on your credit card. No, this probably isn't a typo or a rogue negative sign on the bill. In fact, it’s not a bad thing at all.

In this article, we'll cover how you can end up with a negative balance, whether the credit card company will pay you back and how it will affect your credit score.

What does a negative balance on a credit card mean?

Having a negative credit card balance on your account means that you are owed money from your credit card company (unlike a positive balance, which means you owe money). Another way to look at it is that you paid more than the total balance that was due and are owed a credit to your account.

This means you don’t have to make a payment for that billing cycle because you don’t currently owe any money. If you are set up with autopay, no withdrawal will be made from your linked account.

Why do I have a negative balance on a credit card?

A negative balance on your credit card isn't some form of trickery. Instead, it means that the credit card company owes you money. This can happen if you overpay your bill, you get a refund on a purchase after paying off your balance or if you apply too many rewards all at once.

You overpaid your credit card bill

A common cause of a negative balance on your credit card statement is that you paid more than you owed. If you make online payments through the credit card's website, the issuer will generally keep you from paying more than your credit card balance. You can also usually avoid this issue by setting up autopay to automatically withdraw either the full account balance or the minimum required payment.

However, if you write a check or pay your credit card through your bank account's online bill pay, the credit card company will accept the overpayment and post the overage on your statement as a negative balance. 

For example, if you owed $100 but accidentally mailed in a $150 check, you would have a -$50 balance on your next statement. 

You returned something you bought with the credit card

Perhaps you bought an item with a credit card and then did the wise thing by paying off the balance quickly. However, you soon learned the product you purchased wasn't what you needed or was broken, so you returned it. Since you already paid off the balance, that refund will create a negative statement balance after it is processed to your credit card. 

For example, if you bought a shirt for $10, paid off your credit card the following week, then realized the shirt was the wrong size and returned it, your credit card would have a -$10 balance. 

This can also happen if you successfully dispute a fraudulent charge on your credit card account after you’ve already paid off the balance. The credit card company will refund the amount to your account, which could result in a negative balance.

You cashed out too many rewards

If you're working with a cash-back rewards credit card and prefer to use the rewards as statement credits, you can mistakenly apply too many rewards to your balance. This miscalculation will create a negative credit card balance, much like overpaying your credit card via check. 

What happens if my credit card balance is negative?

Though the credit card company has your extra cash, it won't hang on to it and refuse to give it back. One way or another, you will get this cash back — either in the form of a refund payment from the credit card company or by simply using your credit card to zero out the balance. The method by which you receive the money is generally up to you. 

Here’s more information on how you can get this cash back.

Just wait it out

Credit card companies are not out to keep hard-earned cash you don't owe them. If you end up with a negative balance on your credit card, you can kick back and wait for the credit card company to handle it.

Even if you don’t request a refund, your credit card company is required by law to make a good-faith effort to return the cash to you if the negative balance remains for six months. If you've moved and haven't updated your address, you'll want to do that online or over the phone. Otherwise, the card company's good-faith effort may end up in the wrong mailbox. 

Waiting for six months is far from an ideal situation, though. With so many options for receiving the cash, it’s best to use this option only in extreme circumstances, like if you’re out of the country for an extended time.  

Request a credit balance refund

If you're in a pinch for money, that negative credit balance may come in handy. To expedite the process of getting your cash, you can call the credit card company's customer service team using the phone number on the back of your card and request a refund. Some credit card companies will offer several refund options, including a check or even a direct deposit into your bank account. 

Regardless of the refund option you choose, it will still take a little time for the refund to get to you. When you request a refund, the law gives credit card issuers seven business days to send the funds to the cardholder. If you choose to have a check mailed, the post office will take several additional days to get it to you.

In some cases, you may want a paper trail backing up your request for a refund. In these instances, you can send a written request for a refund via certified mail to the credit card company. 

Use the credit card

That negative balance on your credit card is almost like cash in your bank account. Instead of waiting for a check to arrive in the mail, you can simply use the credit card for future purchases to zero out your current balance. 

For example, if you have a -$25 balance on your credit card, simply spend $25 on new purchases to get back to a $0 balance. 

In some cases, it may be hard to hit the credit amount exactly, but most stores can split payments. If this is the case, you can put the exact credit amount on one card and pay any remaining balance in cash or with a debit card.

So, for example, if you have a -$25 balance and spend $26.95 at the store, you can ask the cashier to run your credit card for $25 to zero out the negative balance and pay the remaining $1.95 with your debit card or cash. You won’t owe any payments on your credit card until your balance exceeds $0.

Can you get a negative credit card balance refunded on a closed account?

If you accidentally make an overpayment to your credit card company and then cancel the account without realizing the credit card company owes you cash, you may think you can bid those dollars farewell. Fortunately, the six-month law requiring credit card companies to return any overpayments to you is valid on closed accounts too.

Just like you have to pay the outstanding balance if you still owe money when closing an account, the credit card company must make a payment to you for the full negative balance amount. Unfortunately, you can’t place interest charges on the money they have to pay back.

You can also call the credit card company or send a certified letter to expedite the refund process. In this instance, the credit card company has seven business days to initiate a refund. For closed accounts, this will typically be done via check or money order.

Will a negative credit card balance affect your credit score?

Having a negative credit card balance is not a big deal to your personal finances, as you will get that cash back one way or another. But since a negative balance lowers your credit utilization ratio, which is your account balance minus your credit limit, it’s logical to assume it’ll improve your credit score by increasing your available credit. 

However, while the credit balance technically results in a negative credit utilization ratio in terms of raw numbers, the credit bureaus don't see this negative balance. Instead, this negative balance shows up as a zero balance on your credit report. Having a zero balance can still help your credit score, but a negative balance isn’t going to be any better than simply paying off your credit card debt in full at the end of each billing cycle.

It's your money, and the law says so

Regardless of the process you use to request a credit balance refund, the law says that the negative balance is your money. And with a firm understanding of the options for receiving the cash, you can better determine the refund route that's best for you to get your money back.

If you don't need the money now and are too busy to sit on hold with your credit card company, you can wait it out. The credit card company will get the cash to you eventually.

If you're in a financial pinch or just want the cash sooner than later, you can use the credit card to purchase items that add up to the negative balance or call the credit card company and request a credit balance refund as a check or direct deposit.

If you’re not lucky enough to have a negative balance on a credit card and instead find yourself struggling with credit card debt, Tally† may be able to help. By combining your credit card debts into a lower-interest line of credit, you can pay off your debt quickly and take control of your financial future.

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.