Is a negative balance on a credit card bad?

A negative balance on a credit card means your balance is below zero. In other words, your credit card company owes you money instead of the other way around. At some point or another, you essentially paid more than the total amount that was due. 

It’s easy to think of a negative balance as a bad thing. After all, this is especially true when it comes to your checking account or savings account. But a negative balance on a credit card isn’t necessarily causing worry. 

Here’s why you may have discovered a negative balance on your credit card and what it means for your finances. 

Why you might have a negative credit card balance

You can have a negative balance, sometimes called a credit balance, on your credit card account for several reasons. We’ve listed some of the most common. 

You received a refund

When you return a purchase or dispute a credit card charge that’s already been paid more, the money is deducted from your credit card balance. If that dedication is larger than your existing balance – say because you’re financially and responsible and pay off your credit card balance each month – it’s possible to end up with a negative balance.

You overpaid

If you manually enter your credit card payments, it’s possible you accidentally paid over the total balance amount. When this happens, you’ll find your credit card balance in the negative. 

You earned a statement credit

Credit card bonuses or cashback rewards can be a great incentive to keep using your card. If you’ve recently redeemed credit card rewards as a statement credit, it’s possible you’ve more than the total amount of your balance was deducted.

You have a fraudulent charge removed

Maybe someone recently used your credit card without authorization or a merchant made a mistake. After you’ve called the credit card company and successfully disputed a fraudulent charge, it’s possible that your account was credited after you’ve paid off your outstanding balance – resulting in a negative credit card balance. 

You have fees canceled

Credit card companies are notorious for charging a bunch of fees – from interest charges, annual fees to late fees. Sometimes, you may be able to dispute your fees or negotiate them down. If this happens while you’ve already paid down your balance, you can end up with a negative balance.

What to do about a negative balance on a credit card

Noticing a negative balance on a credit card isn’t necessarily cause for alarm. It simply means the credit card company owes you money – which is a lot better than you owing them money! 

Here are some options for getting your money back after you spot a negative balance on your credit card. 

Wait it out

Credit card companies are required by law to try and return the cash to you if a negative balance remains for more than six months. So long as your address hasn’t changed and your contact information remains the same, you should expect the company to return the cash to you. However, you may or may not be ok with waiting 6 months to receive your funds. 

Contact customer service

If you prefer to receive the negative balance amount in your hand as cash sooner, you can always contact your bank and make a request. After all, it’s your money so you can ask to receive a check or cash. 

Use your credit card

This is perhaps the easiest way to get rid of a negative balance on your credit card. If you frequently use your credit card to make everyday purchases, simply make a purchase and the balance will climb back towards zero. 

How a negative balance affects your credit score and credit limit

A large credit card balance, especially in relation to your overall credit limit, can hurt your credit score. On the other hand, a negative credit card balance won’t really have a major impact on your score. 

Credit bureaus view negative credit card balances as a $0 balance. So while it will have a positive impact in terms of lowering your credit utilization rate, a negative balance isn’t any better than a zero balance when it comes to improving your credit score. 

Low credit card balance can mean better credit score 

While a negative credit card balance can temporarily increase the amount of money you’re able to spend on your card (also known as your available credit), it won’t ultimately raise your credit limit. 

Still, maintaining a low credit card balance is an important component of overall credit health. And if you can maintain a zero balance, you’ll save on interest fees and boost your score.

FAQ

What should my credit card balance be?

Ideally, your credit card balance should be zero since that’s the best way to avoid paying interest on your balance. If you can’t get your credit card balance to zero, staying under 30% of your total credit limit will keep your score healthy.

Is a negative credit card balance bad?

Not necessarily. A negative credit card means the credit card company owes you money.

Can you have a negative balance on a credit card?

Yes! You may have a negative balance on your credit card for a number of reasons, but ultimately, it boils down to having paid more than your total balance.