When your credit card company owes money to you it shows a negative balance on credit card. In other words, we can say that you have paid the excess amount on the total credit card payable amount.
Most credit card companies do not encourage you to pay more than an outstanding credit card payable amount.
When will you find a negative balance on the credit card?
Sometimes it may happen that you paid an excess amount than your due amount by mistake.
It may happen that you have issued a cheque with rounding off to the total amount over your credit card due.
Example – Suppose your credit card due was AED 785.36. You have issued a cheque/paid online for AED 1000.00, the excess amount over your due will reflect as a negative balance.
You may find a negative balance on your monthly statement and it will also show on the main page of your online banking internet account.
Below are other events that you have the negative credit card balance
- Purchase returns from the seller
- Refunds from credit card issuers such as interest expenses, credit card fees, annual fees and others
- Expenses charged in error by the credit card issuer
- Refund due to any frauds
- Bonus amounts credited by the credit card company.
A Positive balance on credit card
A positive balance on a credit card means that you have a certain payable amount due.
Within the due date each month if you had paid the total due amount, interest will not be levied on your account and it will show a positive balance.
Your account will also stay in a positive balance if you continue to pay only the minimum due amount.
What happens if you have a Negative balance on a credit card?
The credit card company is responsible for making your payment if you have a negative balance on the credit card.
You can either use these negative balances and adjust your future credit purchases or you can request your bank to do an amount refund to your account.
The credit card limit will be the same, it will not increase with the increase in a negative balance on credit card. It only means that the cardholder is spending more than the card limit by overpaying to the credit card issuing company.
The negative balance on credit cards will reduce your credit utilization ratio. The ideal usage of credit cards is to use between 1 percent to 10 percent of your total available credit amount.
If you have stopped using your credit card and there exists an unclaimed negative balance on your credit card. The card issuer will cut a check for the same amount and send you the cheque. This step will be taken by the bank after several months of credit card inactivity.
Bottom line
There is nothing to worry about negative credit card balance as you have done nothing wrong. Negative credit card balances only mean that you have paid extra amount to the bank and you will get a refund from the bank. If your credit card statement shows a negative balance, you can request the bank for a refund or adjust with your future credit purchases.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
