Understanding Negative Balances on Your Credit Card

At O1ne Mortgage, we prioritize consumer credit and finance education to help you make the best financial decisions. In this blog, we will explore the concept of negative balances on credit cards, their causes, and what you can do if you encounter one. If you have any mortgage service needs, feel free to call us at 213-732-3074.

What Can Cause a Negative Balance on Your Credit Card?

A positive balance on a credit card indicates that you owe money to the credit card company. However, there are situations where you might find a negative balance, which means the credit card company owes you money. Here are some common scenarios that can lead to a negative balance:

Fraudulent Charge Reversal

If someone uses your credit card without your permission, the fraudulent charge will be reversed once discovered. If you have already made a payment towards that charge, the reversal could result in a negative balance.

Returned Purchase Refund

If you return a purchase made with your credit card and have already paid your bill, the refund could create a negative balance.

Overpayment of the Bill

Sometimes, you might accidentally overpay your credit card bill. This can happen if you make a mistake while entering the payment amount or if you receive a credit around the same time as your payment.

Canceled Fees

If you negotiate with your credit card issuer to waive certain fees, such as late fees, and have already paid your balance including those fees, a negative balance will appear on your statement.

Statement Credit

Many rewards credit cards allow you to redeem points, miles, or cash back as a statement credit. If the credit exceeds your current balance, it will result in a negative balance.

Does a Negative Balance Affect Your Credit Score?

A negative balance on your credit card does not negatively impact your credit score. Your credit card issuer reports your account balance to the credit reporting agencies each month, but having a credit on your account won’t harm your credit score.

Your credit utilization rate, which is the percentage of your available credit that you’re using, is a crucial factor in your credit score. While it’s recommended to keep your utilization rate low, having a 0% utilization rate (a $0 balance) is not necessary for a high credit score.

Additionally, a negative balance does not affect your credit card’s limit. For example, if your limit is $5,000 and you have a negative balance of $200, your new credit limit is not $5,200. You can 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

If you notice a negative balance on your credit card, there are a few actions you can take:

Request a Refund

Some credit card issuers will automatically provide a credit balance refund after a certain period. If you want the money sooner, you can request a refund directly. Depending on the issuer, you may be able to do this through your online account, via live chat or phone, or in person at a local branch. Refund options may include direct deposit, a paper check, or a transfer to another card with the same issuer.

Make a Purchase

You can also spend down the negative balance by making purchases. For instance, if you have a -$200 balance and spend $250, your new balance will be $50.

The Bottom Line

While it’s uncommon to have a negative balance on your credit card, it’s not something to worry about. If you use your card for everyday purchases, you can easily spend down the negative balance. If you don’t use the card regularly or the credit balance is substantial, consider requesting a refund.

Although a negative credit card balance won’t affect your credit score, it’s still essential to monitor your credit regularly. Understanding how your credit card usage impacts your credit score is crucial for maintaining good credit health.

At O1ne Mortgage, we are here to assist you with all your mortgage service needs. Call us at 213-732-3074 to speak with one of our expert loan salespersons. We are committed to helping you achieve your financial goals.