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Negative Balance on Credit Card: What It Is & How It Happens

What Is a Negative Balance on a Credit Card?
Jason Steele

Jason Steele

Updated February 21, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
The balance on your credit card is the amount you owe from using your card to make purchases. If you pay off your balance completely by the monthly due date, your balance will be zero. If you haven’t paid your entire balance, then you will have a positive balance. But what does a negative balance mean on a credit card? As you may have guessed, this is when your credit card balance drops below zero.In this article, we’ll explore how a negative balance on a credit card can happen and what you can do about it.

What Is a Negative Balance on Your Credit Card Statement?

An important credit card term to know, a negative credit card balance is when your balance on your credit card statement is below zero. So, for instance, you may receive your credit card statement and see that you have a -$300 balance. This means that the credit card company owes you that amount, instead of you owing them money. When you make purchases going forward, they will be added to that negative amount.

How Does a Negative Balance Happen?

You may be wondering why your credit card balance is negative, and how it happened. A negative credit card balance can happen for a variety of reasons, including overpaying your credit card bill, getting a credit card refund, using too many cash-back rewards or receiving a refund from a fraudulent transaction. 

1. Overpaying Your Credit Card Bill

If you accidentally pay too much toward your credit card bill, your balance will end up being negative. Perhaps you mistakenly entered a larger payment amount than you owed, or you made a manual payment on top of your automatic monthly payment. This may leave you with an overpayment, and therefore a negative credit card balance. 

2. Returning an Item You Purchased With the Card

Returning a previously purchased item can also result in a balance that’s negative. If you pay off your credit card balance before your refund posts, it can lead to a negative balance on the next credit card statement.

3. Using Too Many Cash-Back Rewards

If you have a rewards credit card that allows you to redeem rewards to cover your purchases or that provides bonus rewards, annual credits or statement credits, you could end up with a negative balance. For example, you may pay off your credit card balance and then later redeem a reward, or your statement credit may be delayed in showing up. These circumstances could leave you with a negative balance on your credit card. 

4. Refund from a Fraudulent Transaction

If your card had a fraudulent transaction that was later removed or refunded, you may end up with a negative credit card balance. If you paid your balance before the refund was issued and did not make additional purchases on the card yet, the ending balance may be negative.

What Should You Do When You Have a Negative Balance on Your Credit Card?

When you have a negative balance on your credit card, there are several ways to bring the balance back to $0, including waiting for a refund, asking for a refund or making a new purchase.

1. Wait for a Refund

After a certain amount of time, the card issuer may refund your negative balance by check, cash, direct deposit or money order. You probably won’t receive interest on that amount, so if it’s a large balance, then you may want to be more proactive about securing your refund.

2. Ask for a Refund

If you don’t want to wait for a refund, then you can ask the card issuer directly for the refund. Card issuers are required under the Truth in Lending Act to refund any credit balances over $1 within seven business days after receiving a written request. Just like if you were to wait for a refund, you may receive the refund as a check, cash or money order. Always make sure that you have a current address and phone number on your account so that the card issuer can send you the refund to the right place.

3. Use the Card to Make a Purchase

Perhaps the simplest way to remedy a negative balance is to use your card to make a new purchase. Of course, you should only make a purchase that you would normally make; don’t make a purchase only for the sake of bringing your balance above $0. If your negative balance is substantial, you may be better off asking or waiting for a refund instead to avoid ending up with the opposite problem and looking for tips on paying off credit card debt.

Is a Negative Balance a Bad Thing?

Despite the fact that it’s called a “negative” balance, a negative balance isn’t necessarily a bad thing. A negative balance doesn't hurt or help your credit score, as most credit models consider negative balances equivalent to a $0 balance for the purpose of your credit score.The only “bad” thing about it is that you have overpaid, and that money is temporarily unusable to you. In fact, a negative balance usually means that you are in good standing, because paying off your balance on a monthly basis keeps your credit utilization rate low, which, if you’re familiar with the way credit cards work, you’ll know helps to maintain or improve your credit score. 

What to Do About Negative Balance on a Closed Credit Card Account

If you have a negative balance while in the process of closing a credit card account, then you should ask for the refund prior to closing the account. The card issuer may even do this without you having to ask. But if your account closes prior to a refund being issued, you should contact the card issuer as soon as possible to request that a refund is sent by mail or through a direct deposit into a checking account.

Compare Credit Cards With Lantern

A negative balance on a credit card can happen for a handful of reasons, including overpaying your credit card bill, making a return, overusing your credit card rewards or getting a refund on fraudulent activity. Even though it may sound negative, it really isn’t — a negative credit card balance doesn’t have an effect on your credit score, though you won’t be able to use the funds while they’re sitting there as a negative balance. In fact, a negative credit card balance can show positive financial habits, as it likely means you’re staying on top of paying off your balance. If you’re considering a new card, Lantern by SoFi can help you compare credit cards.
Photo credit: iStock/andresrThe tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit (https://www.consumer.ftc.gov/topics/credit-and-loans)SOLC1221048

Frequently Asked Questions

Will a negative balance affect my credit score?
Is it bad to have a negative balance on a credit card?
Can a negative credit card balance be refunded?
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About the Author

Jason Steele

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
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