What is a negative credit card balance — and what should you do if you have one?

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If you’re checking your credit card statement and see a negative balance, you may be thinking, “Did I do something wrong?' Don't worry! A negative balance on your credit card isn't a cause for panic — it's actually good news. 

What is a negative credit card balance?

A negative credit card balance means the credit card company owes you money instead of you owing them. This can happen when you overpay, receive a refund or statement credit, or the credit issuer corrects a mistake in your favor.

For example, if you pay $500 every month but only made $450 in purchases this billing cycle, you’ll have a negative balance of $50.

A negative account balance is the exact opposite of credit card debt. With credit card debt, you owe money to the credit card lender. With a negative balance, the lender owes you money.

“You shouldn't panic about seeing a negative number on your credit card statement because you can easily rectify it,” says Hazel Secco, certified financial planner and founder of Align Financial Solutions. “If it's the credit card you use regularly, you can offset the negative balance by using the card. If you don't plan on using the card for a long time, you can also request a refund from the credit card company.”

What causes a negative balance?

While a negative balance isn’t something to worry about, you might wonder why it’s happening and if you can do anything to avoid it. Here are the most common reasons for a negative balance.

Refunds from purchases or disputed transactions

You'll see a negative balance if you’ve paid off your statement balance and then received a refund from a merchant or the card issuer for a dispute.

“Refunds usually take five to seven business days to reflect on your credit card balance after the refund request is confirmed, which can lead to a delayed adjustment and result in a negative balance if you had already paid off the card,” says Secco.

Overpaying credit card bills

You may have a negative balance if you make a payment greater than the combined total of the statement balance and purchases made since the statement closed.

Statement credits from rewards, cash back, or sign-up bonuses

When there’s no balance on the card, and you receive a statement credit from rewards you’ve redeemed, cash back, or a sign-up bonus, you may see a negative credit card balance.

Merchant errors or duplicate payments

Although rare, merchant errors that are fixed can cause a negative credit card balance. This happens when the correction occurs after you’ve paid off the balance.

Refund of fees

You might see a negative credit card balance if fees are waived from a previous statement. For example, if you’re late with a single payment, you can call the credit card company and ask for grace. It’s possible to get a refund of the late fee if your payment didn’t arrive on time.

Implications of negative balances

A negative balance means you have paid more than you owe on the closing statement — so you won’t pay any interest on the balance.

A negative balance can positively impact your credit utilization ratio, which is an important factor in your credit score. Credit utilization is the amount of credit you're using compared to your credit limit. When you have a negative balance, your credit utilization for that card is effectively 0%, which is ideal for your credit score.

For example, if you have a $1,000 credit limit and a $100 negative balance, credit scoring models see this as 0% utilization, not -10%. This can be particularly beneficial if you carry balances on other cards.

It’s important to note that while a negative balance won't hurt your credit score, it won't provide any additional boost beyond the 0% utilization. In other words, a -$100 balance isn't 'better' for your credit score than a $0 balance.

If you don't request a refund or use your card, the card issuer will typically send you the amount within six months. But leaving money with your credit issuer means it’s not in your hands. If you’d rather use it, here are your options for dealing with a negative credit card balance.

How to deal with a negative credit card balance

Your next steps on a negative credit card balance are pretty straightforward:

1. Let the negative balance remain on the account for future purchases. You don’t have to do anything to resolve the negative balance. The credit issuer will use your negative balance to cover next month's purchases.
2. Request a refund check from the credit card issuer. If you’re not planning on using the card anytime soon, you can request a refund of the surplus funds. Typically, you can expect to receive your refund within 7-10 business days after making the request. Some issuers may process it faster, while others might take up to two weeks. The refund is usually sent as a check mailed to your address on file, though some issuers may offer direct deposit to your bank account
3. Adjust future payments to bring the balance to zero gradually. If you have a significant amount of money on credit with your card issuer, you can adjust the payments you make in subsequent months to gradually use the credit.

How to prevent negative credit card balances

While you shouldn't worry about negative credit card balances, you might prefer to keep the money in your pocket rather than with your credit card issuer

“You can prevent negative credit card balances by being mindful of any refunds you might have requested and adjusting your payment to the credit card company accordingly,” says Secco.

“What’s more important is ensuring you pay at least the statement balance to avoid high interest charges and penalties,” she says. “Setting up automatic payments for the full statement balance is a good strategy. If you anticipate a significant refund, you can always adjust the payment to avoid having a negative balance on the card.”

A few more strategies you may want to try include:

• Tracking credit card transactions and payments
• Checking your balance with an app or online
• Setting up balance alerts and notifications
• Reviewing your credit card statements

Frequently asked questions

The bottom line

While taking no action can solve the problem of a negative credit card balance, you can also take steps to remediate the negative balance more quickly. You can spend down the balance or request a refund to get your money back.

While you’re at it, you can also be more proactive about setting up financial systems to make managing your finances easier. Install credit card apps or request online banking access. The simpler your finances are, the easier they are to manage, and being on top of your finances is a good feeling.

Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.