What Happens if You Overpay Your Credit Card Bill

Paying off a credit card bill is generally an easy process. You simply have to log in to your account, select whether you have to pay the minimum amount or statement amount, or some other amount, and then submit the payment. But mistakes happen. There may arise a situation where a wrong option is selected or an incorrect amount is entered while paying the bill and you erroneously end up overpaying your credit card bill. Overpayment is nothing but paying the credit card company more than what you actually owe to them. But overpayments happen. Paying more amount than what is due on your credit card bill will not negatively affect your credit card score but would not improve it either. You will not lose your excess money paid towards your credit card bill.

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Overpaying your credit card bill with a small amount will result in a negative balance on your account. But if overpaid in a large amount, the card issuer company might get a fraud trigger. The addition of a single zero to your credit card bill payment can result in a large amount of overpayment. This can be considered a probable sign of refund fraud or money laundering. Though overpayment does not happen quite often still we should know the reasons behind such a thing.

How does overpaying happen

• Overpaying generally happens while making manual payments. Making manual payments give you the freedom to pay whatever amount you are comfortable with. But while entering the payment amount manually, you might mistakenly enter any extra digit or press any wrong button and hence can result in overpaying. For example, you owe a credit card bill of Rs. 1,000 but at the time of payment, you entered an extra 0 towards the payment amount, which comes out to be Rs, 10,000. So, in this case, you overpaid Rs. 9,000 towards your credit card bill payment.
• Receiving cashback is another way in which your credit card bills can be overpaid. Some credit card companies offer cashback on purchasing a product If you receive cashback after you have paid your credit card bill, then the cashback amount will result in a credit balance. For example, you were entitled to a cashback of Rs. 6,500 and your credit card bill was Rs. 5,000. Now after paying the credit card bill of Rs, 5,000, cashback amount of Rs. 6,500 gets credited to your account. In this case, Rs. 6,500 will be a credit balance towards your credit card.
• Another scenario in which your credit card bill gets overpaid is when you receive a refund on the return of a particular item. You had earlier purchased a product but you did not like the product upon its delivery. Hence you placed a return request. You purchased the item through your credit card and then you have paid off the credit card balance in full. After that, the refund amount of returned balance gets credited to your account. Now you will have a negative balance on your credit card.

Learn here: How Does a Credit Card Refund Work?

What happens with the overpaid balance

The overpaid amount stays in your credit card account as a credit balance. The excess amount will remain on your card as a spending limit. You can use this balance for making purchases through your credit card. The credit balance will hance be used towards your new purchases.

How can overpayment be avoided

Credit card overpayments can disturb your financials for a period of time. But you can keep a few things in mind before paying your credit card bills so that you do not end up overpaying.

• Set up an auto-pay option for credit card bill payments. Under this option, you can fix an amount that has to be paid towards your credit card bill every month.
• Check in for all the notifications related to credit cards and make sure you are notified of the bill due date as well so that you do not end up paying your credit card bills twice.
• Cross-check your credit card statement for any purchase return refund or cashback before paying your bills. If you have received any of these, your bill amount will be reduced by such an amount.

Bottom Line

Overpayments may happen. It is a human error. But make sure that it is not a routine affair. There is no benefit in overpaying your credit card bills. Some people think that overpaying credit card bills might improve their credit score but it is a sheer myth. It has zero impact on your credit score. Rather your cash in hand is stuck in the credit card issuer’s account in case of overpayment. It can be avoided by taking simple steps and paying due attention while paying your bills. You can consider setting up an auto-pay option for your credit card by which you can either pay a minimum amount, or the full balance or you even have the option to set an amount according to your convenience.