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

In the vast majority of cases of credit card usage, you’ll experience a positive balance. A positive balance happens when you charge purchases to your credit card and means you owe your credit card provider money. Usually, you’ll pay your positive balance every month, bringing your credit card down to a zero balance.

Occasionally, however, you may have a negative balance. A negative balance means your credit card company owes you money. You’ll be able to tell if your credit card has a negative balance because there will be a negative sign in the available balance section of your credit card’s online banking portal. For example, instead of showing a balance of $500, which means you owe your credit card provider $500. If your credit card has a negative balance, it will show as -$500. 

Why Negative Balances Happen

A negative credit card balance often happens when there is a discrepancy between your payments and your credit card charges. For example, if you pay more than you owe on your credit card, you’ll end up with a negative balance. There are a variety of other ways a negative balance can happen, including:

  • Your credit card provider owes you money, which could appear as a refund or statement credit
  • Your credit card provider has issued you cash back or travel rewards as a statement credit
  • You have received a refund from a retailer
  • You have overpaid your credit card intentionally to cover future purchases

Will a Negative Balance Impact Your Credit Score

Carrying a negative balance on your credit card does not happen very often, but there is no harm in doing so. A negative balance on your credit card will not harm your credit score and may be beneficial. One of the factors that influence your credit score is your credit utilization ratio. Your credit utilization ratio is calculated as your credit card’s balance as a percentage of your total available credit. 

For example, if your credit card has a $5,000 limit and a balance of $1,000, your credit utilization ratio is 20%. It’s recommended that you maintain a credit utilization ratio of less than 30% to have the best possible impact on your credit score. For this reason, a negative balance on your credit card can improve your credit score.

Uses for a Negative Balance on Your Credit Card

While a negative credit card balance most often happens accidentally, you can also intentionally create a negative balance. You can do this by overpaying your credit card on purpose. This overpayment will make extra room on your credit card for additional purchases.

Let’s look at an example. Let’s say you have a credit card with a $500 limit. You can intentionally overpay that credit card by paying off the balance, plus an additional amount, for example, $250. This overpayment creates a total spending limit of the $500 balance plus $250, for a total of $750. You can now make a $750 purchase on your credit card. This strategy is helpful if you need to make a one-time purchase that is larger than your existing credit limit and would prefer not to raise your total credit limit.

What to Do If You Have a Negative Credit Card Balance

If you log into your online banking portal and find yourself with a negative balance, you should take steps to determine why. Occasionally, a negative balance can be an error, and if that is the case, you should call your provider to sort that out as soon as possible.

If your credit card’s negative balance is for one of the reasons listed above, you have a few options to fix the problem. First, you could spend the equivalent of the negative balance to bring your credit card’s balance back to zero. Alternatively, you could withdraw the negative balance as a cash advance, depositing the cash into your chequing account. In both cases, the negative balance is resolved by bringing your outstanding balance back to zero.

The bottom line

Having a negative credit balance is not a negative thing. In fact, it can be helpful in some cases. If you find yourself with a negative balance, there is no need to panic. A negative balance can be a sign that your cash back rewards have been credited to your account, a refund has come through, or you have finally finished paying off your credit card debt – all good things! You can also intentionally create a negative balance to temporarily increase your credit card’s buying power. If you aren’t sure why your credit card has a negative balance, call your provider and they’ll be happy to assist you.