Can You Have a Negative Balance on Your Credit Card?

It's not a common occurrence, but it can happen.

While not everybody realizes this, you can have a negative balance on your credit card. It doesn't happen often, because your card balance is the sum of your unpaid transactions. That means balances on your credit cards will usually be a positive number. But there are a few situations where your card balance could go negative.

Why would you have a negative balance on your credit card?

Your credit card will have a negative balance if you've paid more than you owe. Here are the reasons this can happen:

• You overpay your credit card bill. For example, your card's balance is $50, but you accidentally submit a payment for $500.
• You get a refund on a purchase after you've paid for it on your credit card bill. If you return an item after paying the full balance on your credit card statement, that could result in a negative balance.
• You get a refund on a card fee after you've paid for it. One situation where this could occur is if your card issuer charges you a late fee after you missed a payment, but you later call and are able to get that fee refunded.
• You use rewards to get a statement credit toward previous purchases. Many rewards credit cards let you use your cash back or points as a statement credit. If you've already paid your bill, but also use rewards to get a statement credit, it could lead to a negative balance.

To provide a detailed example, let's say you buy a $1,000 computer with your credit card. Later, you decide to return it. The store refunds the money to your card. If you haven't paid your bill yet, then the credit will even out with the previous $1,000 purchase. But if you've already paid your credit card bill, then you'll have a $1,000 credit.

This won't matter if you've made enough new purchases since then. If you've made $1,500 in purchases by the time the refund processes, then your card issuer will deduct the $1,000 from that, and your new balance will be $500. If you haven't made enough new purchases yet, then you'll have a negative balance.

What happens next

A negative balance on your credit card isn't a big deal. Your card issuer will apply the amount to future purchases you make. If you have a negative balance of $100, that will cover your next $100 in purchases. Simply using your credit card is the easiest way to resolve a negative balance.

You can also contact the card issuer and ask it to refund you. Some card issuers give you this option online. If not, contact customer service by live chat or the phone number on the back of your credit card.

What if you don't make any purchases or request a refund? For example, you might be wondering what would happen with a negative balance on a card you rarely use, if you forget to request a refund. There's nothing to worry about here.

The card issuer will eventually issue a refund itself, normally by check or direct deposit to the cardholder's linked bank account. Card issuers must make a good faith effort to refund negative balances that have been on the account for more than six months, to comply with the Truth in Lending Act. While that's the legal requirement, many card issuers will refund negative balances more quickly.

A negative balance on a credit card isn't something people encounter much, so it could be confusing when you first see it. It doesn't have any sort of negative impact, though. You'll get that money back as you use your credit card or through a refund from the card issuer.