What Does It Mean To Have A Negative Credit Card Balance?

What Does It Mean To Have A Negative Credit Card Balance?

Written by Corrina Murdoch
Fact-checked by Caitlin Wood
Last Updated August 27, 2021

A negative balance can come about as a result of an overpayment, refund, or a host of other ways. While it might seem jarring to find a negative balance on your card, it is actually a maneuver that can lend more credit flexibility. It’s not often that a credit card company owes you money. 

What Does It Mean To Have A Negative Credit Card Balance?

Having a negative credit card balance means that the amount you paid the credit card company exceeded the amount you owed. When this happens, technically, the card-holding company owes you those funds. This is represented on your bill as a negative amount. While the syntax may vary between parentheses or a minus sign, it ultimately means that the card is holding those funds for you. It results in a zero minimum payment and lets you spend the negative balance before using your actual credit limit. 

How Do You Get A Negative Credit Card Balance

There are several ways to get a negative balance on your credit card, some intentional, others mere happenstance. Regardless of the cause, you can always read a negative credit card balance as an opportunity. 

Overpayment

This is one of the less common ways to get a negative balance (unless it was intentional). It refers to paying in excess of the amount owed. For example, if your credit bill, including interest, totals to $550 and you pay $750, you will have a negative balance of $200. This will be clearly marked on your credit card bill.  

Returns

Assume that, of the original $550 amount owing, $100 of it was a purchased commodity. You paid $750 to the bill, but then also returned the item. That $100 gets refunded to your account, increasing your total negative balance to $300. 

Bear in mind that this way of accessing a negative balance is largely predicated on timing. It takes time to process a payment and a refund. Depending on how these line up, you can get a negative balance. 

Cashing Out Rewards

A relatively new phenomenon, cashing out rewards in the form of cash can result in a negative balance in some situations. For one, the rewards you’re redeeming must be in the form of cash applied to the card. In many situations, rewards are separate, where the redeemed prize comes in the form of a prepaid card. 

However, if the rewards go straight towards your balance, and the value exceeds your amount owing, then you can have a negative balance. 

Reversed Fraudulent Charges

In the event that there was a fraudulent charge on your account, and you took the proper steps to rectify the issue, then the amount will get refunded. The process to make the claim and have the money returned to your account varies in time, so it is not a predictable way to curate a negative balance. That said, if the refund coincides with a payment, you can easily slip into a negative balance.  

Correction In Transaction Error

If you were inadvertently overcharged, then the amount will be corrected on your card (assuming you pursue correcting the charge). If this correction results in a payment to your card, it can push you into a negative balance, provided the correction exceeds the amount owing. 

How To Get Your Money Back If You Overpay Your Credit Card

So, you have a negative balance and want to recuperate those funds — moving the money from your credit card back to your bank account. The first thing to consider is whether the refund is worth pursuing. If you don’t need access to the cash, then it may not be worth the effort of trying to get it back. 

Spend The Negative Balance

If you are concerned about the money sitting there, multiple routes are available to get your money back. The easiest is to make any upcoming purchases on the card. These will automatically be taken from the overage, diminishing the negative balance with each purchase. Whether it is for your next grocery shopping or utility payment, you can use the overage to make necessary payments until it is entirely gone. 

Make An Application For Refund

Though the process is straightforward, it can also be time-consuming. Simply reach out to customer service at your credit card company. Go through the verification process and inform them that you wish to have the money refunded. In most cases, the company will issue the refund via paper cheque, unless you have a bank account linked to your file. Due to the number of steps, and the necessary waiting period, most prefer to spend the balance instead.

Benefits Of Having A Negative Credit Card Balance 

Equipped with the knowledge that you can, in fact, recuperate your money, it’s worth taking a moment to consider the advantages of that negative balance. The verbiage is quite misleading; negative balances often have benefits for the cardholder. These benefits include: 

Extra Accessible Funds

The negative balance is money you can spend however you choose. Particularly for rewards cards, this can give you the opportunity to earn extra perks without eating into your revolving credit

Reduced Stress

If you’ve overpaid your credit card to a negative balance, there is very little chance that you will miss a payment. Your minimum payment will sit at zero, provided you do not spend on the card, it will remain that way (until your annual fee comes due if you have one). Though it is better to keep your cards active, a negative balance is a good way to avoid ever missing a payment.  

Temporarily Increased Credit Limit

Though a negative balance won’t officially increase your credit limit, it has a similar effect over the short term. Say your credit limit is $1,500 and it is paid to zero. That means you have $1,500 available funds to spend. However, if you overpay by the $500, you now have $2,000 of accessible funds. 

A negative balance is helpful in the event that you need to use your credit card for a larger purchase. If renting a house for the weekend, for instance, costs $1,750, you could not pursue the rental with your current credit limit. However, with the negative balance, you are able to spend your credit limit, plus whatever you overpaid. 

Bringing Your Negative Credit Balance To Zero

Though you can request an exact refund from the credit card company, it comes with a set of disadvantages. On the plus side, the return is exact, meaning you can get the credit card balance to precisely zero. However, it takes quite some time to receive the (usually in cheque-form) refund. 

The easiest way is to simply make a purchase. In most cases, overpayments are minimal, so your account is not likely to be negative into the three or four figures. Instead, you will likely have a small amount to spend. Though it’s harder to get the account back to exactly zero, making a purchase is likely your best option.

Negative Credit Card Balance FAQs

Is a negative credit card balance bad?

Having a negative credit card balance is never a bad thing. In fact, it can be beneficial in terms of liquid funds, temporary increases in credit limit, and avoiding missed minimum payments. 

Will a negative credit card balance negatively affect my credit?

Absolutely not. Having a negative credit card balance will work in the same way as a zero balance. Both are optimal conditions for your credit utilization ratio, a key factor in calculating your credit score. 

Can I cancel my credit card if I have a negative balance? 

Yes, you can cancel your credit card with a negative balance. You can either spend that amount beforehand; or, if you are struggling to get it exactly to zero, you can request that it be repaid to you via cheque.

Does a negative credit card balance increase your credit limit? 

The increase in credit limit is temporary, reaching only as far as the overpayment you made. You can continue to do this, but it won’t be an increase in credit limit, rather your displacing funds from your bank account to your credit account for ease of use. 

Final Thoughts

Negative credit card balances can be a good thing, but it’s important to remember that all credit card underwriting differs slightly. Many cards have over-limit options that come with a fee. The cardholder agreement must explicitly state that you can hold a negative balance. This is also where you will find details as to whether it comes with a fee, and if you can use a negative balance to temporarily increase your credit limit. 

If in doubt, contact your credit card company or consult your agreement. When it comes to money, particularly credit, it is important to plan ahead. Provided you familiarize yourself with the terms of your agreement, you can use a negative balance in a way that benefits you the most. 


Rating of 5/5 based on 2 votes.

Corrina Murdoch has been a dedicated freelance writer and editor for several years. With an academic background in the sciences and a penchant for mathematics, she seeks to provide readers with accurate, reliable information on important topics. Working as a print journalist for several years, Corrina expanded her reach into the digital sphere to help more people gain insight into the realm of finances. When she's not writing, you can find Corrina swimming and spending time with family.

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