The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
With so many things to keep track of in your financial life, it can be easy to make a mistake every once in a while. And while mistakes like a late payment can have negative effects on your credit health, there are other slip-ups that aren’t necessarily a bad thing—and overpaying your credit card is one of them.
If you overpay your credit card, perhaps as a result of an automatic payment and a manual payment overlapping, there’s no need to worry. You won’t lose the money and your credit score won’t take a hit. You’ll know that you’ve overpaid if you have a negative credit card balance.
What a Negative Credit Card Balance Means
A negative card balance means that something has happened to cause your balance to dip below zero. Your first thought may be that something is wrong—but a negative balance actually means that your credit issuer owes you money.
Common Ways Negative Balances Happen
Negative credit card balances are fairly common, and they’re nothing to fret over. If you’ve noticed a negative balance, you may be wondering what triggered it. Below are five common causes:
- Your manual payments and autopay overlapped. If you manually paid an amount greater than your balance, you would have a negative balance. Alternatively, if you made a payment around the same time an autopayment happened, your balance could dip below zero.
- You received a refund on a purchase. If you made a purchase with your credit card and then paid off your full balance, you would show a balance of $0. If you then returned the purchase and received a refund on the card, you would have a negative balance.
- You earned rewards or statement credits. Some credit card companies offer welcome bonuses or cashback rewards in the form of statement credits. If you received a credit when your balance is already zero, you would have a negative balance.
- You reversed fraudulent charges. If you were the victim of credit card fraud or someone used your card without your authorization, your card issuer would reverse the transaction. This could result in a negative balance, depending on how much was charged and what your previous balance was.
- You negotiated fees. If you’re able to successfully negotiate with your credit card issuer to waive fees, you may end up with a negative balance if you’ve already paid off those charges.
What to Do If You Overpay Your Credit Card
No matter the cause of your negative balance, you have two options:
- Do nothing. Any future purchases you make will bring your account back to positive. If you don’t make any purchases on the card after six months, creditors are required to refund the full negative balance.
- Request a credit balance refund from your credit card issuer. Since a negative balance means the credit issuer owes you money, many people opt to file for a refund to bring their account back up to zero.
How to Submit a Credit Refund Request
Each credit card issuer has their own policy on how credit balance refunds work, so check with your financial institution for step-by-step instructions. Typically, you can request a credit refund online, via mail or over the phone. A refund may be issued as cash, check, direct deposit or money order.
The Federal Trade Commission requires creditors to send you a credit refund within seven business days of receiving a written request. If you haven’t heard from them after seven days, follow up to ensure it was issued and processed correctly.
Fraud Triggers
While credit balance refunds are usually executed without difficulty, there may be instances where your financial institution is suspicious of fraud. This typically happens if the negative balance is significant—like if you added an extra zero to your payment amount.
Large negative balances are a warning signal of refund fraud or money laundering. To combat this, creditors may freeze your account or even shut it down altogether. They do this as a measure of consumer protection—but if it was all due to a mistake, it may cause some inconvenience.
As soon as you become aware of a large negative balance, call your credit company and explain the mistake. They’ll make your account right again.
How Overpaid Balances Show Up on Your Credit Report
A negative credit card balance isn’t bad for your credit. It doesn’t show up on your credit report, so the three major credit bureaus will never know you have a negative balance—it will simply show up as zero.
Perhaps more important than the balance itself is the credit utilization rate. According to FICO, this plays into the “amounts owed” category of your credit score, which accounts for 30 percent of the total score. When you have a negative balance, your utilization rate is zero percent, and it would take more spending to reach the recommended maximum of 30 percent—which works in your favor.
Negative Credit Balance Myths
There tends to be a bit of confusion circulating around negative credit card balances that may cause people to purposefully overpay in hopes of receiving a benefit. These tactics are false and should be avoided.
Myth: Overpaying my credit card will increase my credit score.
Truth: Overpaying has no more impact on your credit score than paying the full balance does. Paying down your credit card to a balance of zero is good for your credit score, but you won’t see an extra boost by purposefully overpaying, because it will still show up as a zero balance on your credit report.
Myth: Overpaying my credit card will increase my credit limit.
Truth: While having a negative balance may provide a little extra wiggle room for a future large purchase, it won’t increase your actual credit limit. If you have a balance of -$100 on a card with a limit of $3,000, your official limit is still $3,000—it will just take you a bit longer to reach that limit, since you have a $100 credit.
Myth: Overpaying my credit card will allow me to profit off interest.
Truth: Overpaying your credit card isn’t at all the same thing as depositing money into an interest-earning savings account. You don’t earn interest on a negative credit balance—the money simply sits there until it is refunded or until purchases bring the account back to a positive balance.
In general, overpaying your credit card isn’t a bad thing and won’t reflect poorly on your credit score. If you’d like to avoid overpaying in the future, consider setting up autopay to pay either the minimum payment, the full balance or a set amount. To learn more about what affects your credit score, explore our blog.
Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.
Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
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