October 30, 2024

Negative Balance on Your Credit Card? Here’s What To Do

Your heart might drop if you see a minus sign in front of your credit card’s current balance. After all, anyone with experience managing a bank account knows what a negative balance means — and it’s not good.

But don’t panic. While you might assume a negative balance on your credit card means you owe more money than you thought, the opposite is actually true.

It’s still smart to figure out why you have a negative statement balance and make a plan for how to handle it. Here’s a breakdown of the reasons it happens and a few options for what to do next.

What’s a negative balance on a credit card?

On a savings or checking account, a negative bank balance means you spent more money than you had available. But on your credit card, it means you’ve paid more than you spent. The credit card issuer now owes you money — not the other way around.

Imagine you have a running tab at your corner market. As you’re passing by one afternoon, you remember that you have a $10 bill in your pocket. You pop into the market and hand the cash to the clerk to put toward your tab before dashing back out the door to finish your errands.

Back in the store, the clerk opens up the notebook where they record their regular customers’ tabs. They see that you only owe them $7.86, so they subtract that from $10 and write -$2.14 beside your name. The next time you come in, you’ll have a couple of dollars in store credit to put toward your morning coffee.

That $2.14 isn’t a gift from the market clerk. It’s not extra money — it was yours to begin with. The same is true for a negative credit balance. The minus sign you see when you check the account online is just a more formal version of an IOU.

What causes a negative credit card balance?

Seeing a negative balance on your credit card statement might confuse you at first. But if you do a little digging, you’ll probably find the reason it’s there. Here are some of the most common culprits:

You got a refund

Say the only charge you’ve made on your credit card this month was for a $50 sweater. The charge was posted to your account, and you paid the bill in full, bringing your balance to $0.

But then you decide you don’t like the way the sweater fits, so you return it to the store. The store’s return policy says they have to issue the refund to the original payment method. If you hadn’t yet paid your credit card bill, the refund would simply cancel out the original charge. But since you have a $0 account balance, returning the sweater brings the balance on your card to -$50.

You made a payment for more than you owed

You’re human, which means you occasionally make mistakes. Maybe you accidentally added an extra zero while writing a check or paying your bill online, turning a $10 credit card payment into $100.

Overpaying on your credit card doesn’t mean the extra money’s gone for good, but be aware that it won’t automatically bounce back into your checking account. We’ll go over your options for getting that money back in just a minute.

You got a statement credit

Some credit cards offer rewards in the form of statement credits that you can apply to travel, balance transfers, or even cashback. If your statement credit is more than the amount you owe on your card, your current balance will dip into the negative.

Your fees were canceled

Did you recently dispute a late fee or ask the credit card company to reverse an annual fee? It can take a little time for your account to reflect a waived or canceled fee. If you’d already brought your balance back to $0 before the card issuer credited your account, a negative balance could happen.

How to get your money back

Different credit card companies have different policies outlining what happens when a customer’s statement balance falls below zero. But if you’re worried about a negative balance, you have a few options for getting your money back.

1. Buy something with your credit card

Unless you’re using a credit card to build credit, you don’t have to use your credit card for everything. But in this case, the only one owing money is the card issuer, and the easiest way to settle their debt is to use your card to buy something you need. Aim for a purchase that’s around the same amount that the card issuer owes you so the transaction doesn’t reduce your available balance.

2. Ask your card issuer for a refund

You can always request a refund from the credit card company. They may be able to issue you a check or even direct deposit the funds into your checking account. Depending on the card company, you can initiate this process online or by calling the number on the back of your card.

3. Use an Earned Wage Access app to bridge the gap

If you accidentally overpaid on your credit card account or returned an item you realized you couldn’t afford, an Earned Wage Access app like EarnIn can help keep your bank account balance positive until the refund from the card issuer hits. The Cash Out tool lets you access your pay as you work — up to $150/day and up to $750/pay period — giving you a cushion until the overpayment is safely back in your checking account.

How does a negative credit card balance affect your credit score?

The short answer is that it won’t. Most credit scoring models focus on factors like payment history, credit utilization (the percentage of available credit you’re using), and types of credit you use.

But overpaying is much better for your credit score than just making the minimum payment. If you pay your full balance (or more) within the credit card grace period, you won’t accrue interest charges on that month’s purchases, and your credit utilization should fall within a healthy range.

Monitor your spending with EarnIn

The more responsible you are with your credit cards, the sooner your credit limit increases. If you’re smart with your spending, that higher limit will lower your utilization ratio and improve your credit score, bringing your other financial goals within reach.

EarnIn’s free Credit Monitoring tool allows you to keep a close on your credit score at any time, for free. You get alerts each time there’s a change to your report, allowing you to act quickly when something’s not right. And with EarnIn’s Cash Out tool in your back pocket, you’ll always have what you need to keep moving forward, whatever life sends your way.

Download the EarnIn app today and get money at the speed of you.

Please note, the material collected in this blog is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or Services.

Restrictions and/or third party fees may apply, see Earnin.com/TOS for details

1. EarnIn is a financial technology company, not a bank. Banking Services are provided by Evolve Bank & Trust, Member FDIC. Subject to your available earnings, Daily Max and Pay Period Max. EarnIn does not charge mandatory fees for use of its services. EarnIn does not charge interest on Cash Outs. EarnIn services may not be available in all states. Restrictions and/or third party fees may apply, for more information please visit http://EarnIn.com/TOS

2. Calculated on the VantageScore 3.0 model. Your VantageScore 3.0 from Experian® indicates your credit risk level and is not used by all lenders, so don't be surprised if your lender uses a score that's different from your VantageScore 3.0. Learn more: https://www.experian.com/assets/consumer-information/product-sheets/vantagescore-3.pdf