Is a Negative Balance On a Credit Card Bad?

Sometimes, there occurs a glitch in the system, wherein we have to see something unusual or something that we have not seen, just like seeing a negative balance on a credit card. The positive balance on the credit card represents the amount that we owe to the credit card company. As and when we pay off the credit card bill, the balance will ultimately come down to zero. We all have been seeing a positive balance on a credit card, which is normal, but witnessing a credit card negative balance is something weird. But the question that arises is – is a negative balance on a credit card bad.

What is a Negative Balance on Credit Card?

Credit card statements show a balance that the credit cardholder owes to the credit card company. It is a sum total of all the transactions made through that card. But sometimes, there might arise a situation wherein you might see a minus sign in front of the amount. This happens when the balance on your credit card goes below zero. Now, this is the amount that the credit card company owes to you.

Reasons behind negative balance on a credit card

A negative balance on credit card can take place because of a few reasons. Let us discuss in detail about these reasons so that we can have a better understanding on how does a negative balance occur on a credit card –

Overpayment of credit card bill

The first and most common reason behind the negative balance on a credit card is the overpayment of its bill. Overpayment can happen when a credit card owner pays the bill manually and by mistake enters the amount that is more than the bill amount. Hence, the overpaid amount will result in a negative balance on a credit card. For example – you owed a bill of Rs. 1,000 to the credit card company but while paying manually, you mistakenly entered an extra 0 to Rs. 1,000 which mistakenly became Rs. 10,000. Now Rs. 10,000 have been deposited towards your credit card bill instead of Rs. 1,000. Rs. 9,000 have been overpaid towards your credit card bill which will be shown as a negative balance on your credit card.

This can also happen when an auto-pay towards a credit card bill is already activated but you manually make a payment. This can also result in a negative balance on a credit card. For example – You tend to forget that the auto-pay feature is already enabled on your credit card, hence you make a manual payment towards your credit card bill. But on the due date, the credit card bill payment gets auto-deducted as well. Therefore, an extra amount paid towards the credit card bill will result in a negative balance on the credit card.

Also Read: Credit card bill payment methods

Credit card refund

By credit card refund we mean, you purchased a product through your credit card but due to any reason, you had to return the product. Now you have already paid the credit card bill. After paying the bill, the refund of that product was credited to your account. Now since you have already paid the bill and received the refund later, this amount will be shown as a negative balance on your credit card.

Cashback has been credited to your account

You had purchased a product through your credit card during some offer period which stated that you will be entitled to a fixed amount of cashback within 45 – 90 days of purchasing this product through a particular bank’s credit card. Now purchased the product using the credit card and paid off all the bills on time. After 45 days, the cashback amount gets credited to your account. Since you had already paid for the credit card will, your account balance would be 0, but after receiving the cashback amount, your account will represent a negative balance on the credit card.

Other reasons

Other reasons for having a negative balance on your credit card may be that there might have been some fraudulent charges on your account that might have been removed, or some late fees or interest charges that were mistakenly charged have been waived off from your account, etc.

Impacts of Negative Balance on a Credit Card

Having a credit card with a negative balance is not a bad thing at all. But this negative balance is not going to provide you with any benefit as well.

– Overpayment of credit cards leads to a negative balance on your credit card. But a negative balance does not impact your credit score in any way. This would neither improve nor degrade your credit score.

– Negative balances on a credit card can make the closure of a credit card a cumbersome process. You will have you utilize the negative balance first, only then you will be able to dispose off your credit card.

– This can also portray a positive image of you. A balance will go to negative only when your credit card balance is already 0 or less than the amount of cashback. Finding a credit card account that is negative means that you are very particular about paying your credit card bills and are efficiently managing your finances.

What to do with the negative balance on the credit card?

If you are a frequent credit card user, this negative balance will not be a big problem for you. This negative amount can be adjusted against the further purchases that you will make through your credit card. This amount will be adjusted against the bill generated for future purchases made through your credit card.
On the other hand, you can call customer care of the respective bank and ask for assistance regarding this issue. They might refund the amount to you in your linked bank account.

Bottom Line

Negative Balances are the balances that the credit card company owes to you. This situation may arise out of carelessness while paying your credit card bills manually or not keeping a track of your cashback and refunds. Negative credit card balances would not affect your credit score in any way – neither positive nor negative. These balances will not show up in your credit history either. Some people think that having a negative balance on a credit card may enhance their credit scores but this is wrong. Also while you pay interest on the overdue balance on your credit card, you will not earn any interest in case of a negative balance on a credit card. Ultimately, having a negative balance on your credit card is neither a good nor a bad thing. But you have to take care that this is not a routine affair as having a negative balance on your credit card on a regular basis can be considered a trigger warning for banks in case of money laundering or refund fraud. And your account will be put under Income Tax surveillance. Hence, to protect yourself from all such hassles, make sure that you do not have a negative balance on your credit card by checking your credit card statements thoroughly and on regular basis.