Why do I have a negative balance on my credit card?

Young woman sitting on city steps, looking questioningly at her cellphone screenImage: Young woman sitting on city steps, looking questioningly at her cellphone screen

In a Nutshell

Having a negative balance on your credit card account doesn’t necessarily mean you’ve done something wrong. It could simply mean that you’ve received a refund or statement credit.
Editorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.

If you log in to your credit card account portal and see a negative balance, you may be alarmed. How did this happen? What does it mean?

Contrary to what you might think, having a negative balance on your credit card account, known as a credit balance, doesn’t necessarily mean that your available credit is reduced or that you’ve done something wrong. In fact, a negative balance on your credit card account could simply mean that your card issuer owes you money.

When you make a purchase on your credit card, the amount of that purchase is typically added to your credit card balance, which is how much you owe on that account at a given time. Paying off a credit card generally means bringing the account balance down to $0.

But what if your balance is -$10, or -$100? A negative balance on your credit card is potentially a sign that you’ve overpaid what you owe.

Other events that could cause a negative credit card balance include …

  • A returned purchase
  • A refund of certain credit card fees (annual fees, late fees, interest charges, etc.)
  • A refund due to an erroneous or fraudulent charge
  • A statement credit granted by the card issuer as part of a sign-up bonus or promotion

Greg Johnson, co-founder of Club Thrifty, explains that there are instances when you may be issued a statement credit, such as rewards card redemptions.

“Should you make a payment toward your balance, then claim a statement credit, you could end up with a negative balance,” he says.

Johnson illustrates how this might work: “Let’s say your outstanding balance is $500. You make a payment of $400; then claim a statement credit toward travel expenses of $300. You would then end up with a balance of -$200.”

In most of these situations, you have options for how to handle the resulting negative balance.

We’ll get to that. But first, let’s dive into some common questions associated with having a credit card with a negative balance.

Is my credit limit higher now that I have a negative balance?

“Overpaying does not mean you have a higher credit limit,” says Ashley Tufts-Freimuth, vice president of corporate affairs and communications at American Express.

“Your credit limit remains the same, but a card member would be able to spend more than the credit limit (by the amount of the overpayment) without exceeding their credit limit.”

Tufts singles out overpayments, but the same logic should apply if your negative balance resulted from a refund or a statement credit as well.

If your credit card balance is -$100 and your credit limit is $10,000, you can technically spend $10,100 on your credit card before exceeding your credit limit. (Most experts recommend keeping your credit card utilization below 30%, so treat this as purely hypothetical.)

Your credit limit is typically set by the issuer when you apply for your credit card. You can ask for a credit limit increase from the card issuer (which may or may not result in a hard credit inquiry), but don’t treat a negative balance as a de facto credit limit increase.

How do I bring my credit card balance back up to $0?

When you have a negative balance on your credit card account, you have a couple of options.

On one hand, you could do nothing and use your card as you normally would. As you charge purchases on your credit card, your credit balance will be applied to your new purchases, and the balance will gradually move toward $0 until you’re back at square one.

On the other hand, you could request the credited amount be disbursed to you in some form other than a statement credit. Other options available to you may include cash, check, money order or credit deposit.

You should know that banks and creditors are required to deal with negative balances in a specific way. For example, if your credit balance is more than one dollar, your creditor must handle the credit balance by …

  • Crediting your account for the amount of the credit balance
  • Refunding any part of the remaining credit balance within seven business days after receiving a written request from you
  • Making a good-faith effort to refund the amount to you by cash, check or money order, or crediting your deposit account any part of the credit balance remaining in your account for more than six months

The creditor isn’t required to take any additional action if it doesn’t know your current location and can’t trace your location through your last-known address or telephone number.

Sandra Bernardo, a corporate communications leader at Experian, says you should still understand how your specific credit card issuer handles negative balances, as each issuer can have its own policies in addition to federal requirements.

“That’s one reason it’s so important to understand the contract you have with each of your creditors,” she says.

Bernardo continues, “The contract should explain how overpayment amounts will be treated — both while the account is open and … if you choose to close the account.”

Bottom line

A negative credit card balance is usually not a negative at all. In some cases, it’s actually more of a positive!

It could mean that you have some extra wiggle room when it comes to how much you can spend on your card.

As for your options, you may consider either using the statement credit on an upcoming purchase or requesting a refund from your card issuer. It’s probably worth reaching out to your credit card issuer for more insight if you’re confused about how the negative balance got there in the first place.

About the author: Aja McClanahan is a Chicago-based writer and blogger who covers topics on personal finance and entrepreneurship. She holds a bachelor’s degree in economics and Spanish from the University of Illinois at Urbana-Champai… Read more.