Ultimately, nothing really happens if you have a negative credit card balance. It doesn't hurt you. But still, you want to check in on your account regularly to make sure you don't wind up with a negative balance.
Having a 0 dollar balance will not hurt your credit score. The trick with credit cards is spending ~10% of your credit limit before the statement comes, then pay it after the statement comes, but before it's due. Carrying a balance is NEVER a good thing.
For example, if your account has a negative balance for too long (typically 60-90 days), it could be sent into collections. This would appear as a negative event on your credit history and lower your credit score. To avoid this, it's important to repay the overdrawn bank balance as soon as possible.
It means that you have a surplus amount on your card. You can check for the exact reason of the surplus with your card provider and use the negative balance for purchases. Why does my credit card show negative balance? It means that you either overpaid against your card or you have received some cash back or rewards.
Ask for cash
If you have a significant negative balance and don't need to transfer it to another card, you may want to ask to receive the negative balance in cash. Often, banks will give you the cash amount through direct deposit or mail you a physical check for the amount they owe you.
Anything 'above zero' is a credit balance.
Most of the time, a negative credit card balance won't cause any issues. However, if the amount is significant, your credit card issuer might suspect fraud. A large overpayment can be a sign of money laundering or someone attempting to get refunds for stolen items.
Having a negative bank balance can result in costly fees, declined transactions, account closure, and credit impact. A negative balance occurs when you make payments that exceed the funds in your account. Overdraft protection can help cover the difference, but it comes with fees.
You won't lose the money, but you also won't earn any interest, and in most cases the funds will just stay in your account until you use your credit card again. To avoid confusion over the definition of an 'overpayment', don't mistake overpaying with paying more than the minimum required amount.
In general, keep unused credit cards open so you benefit from longer average credit history and lower credit utilization. Consider putting one small regular purchase on the card and paying it off automatically to keep the card active.
Keeping a low credit utilization ratio is good, but having too many credit cards with zero balance may negatively impact your credit score. If your credit cards have zero balance for several years due to inactivity, your credit card issuer might stop sending account updates to credit bureaus.
In fact, in our research on a representative sample of millions of individuals from April 2023, we found that the average FICO Score in the United States for people with no current debt was 737, which is almost 20 points higher than the national average of 718.
Overpayment on your credit card does not improve your credit rating or increase your card's limit. If you make an overpayment, the card company may apply the negative balance toward your next statement, but you can also request a refund.
If you have paid your card down to a zero balance before receiving your refund, you will have a negative balance on your credit account — and any future purchases will be applied to the negative balance first.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
In fact, a negative balance could actually help you improve your credit scores. A negative balance could potentially affect your credit utilization ratio—a measure of how much of your available credit you're using. Experts recommend using no more than 30% of your available credit.
The Bottom Line
It's not often that you'll have a negative balance on your credit card, but don't fret if it happens. If you use the card for everyday purchases, you can get that money back simply by making purchases—the card issuer will cover them until you reach a $0 balance.
Overdrafting your bank account and not paying what you owe could result in some negative consequences, like racking up even more fees, having your account closed, the debt going to collections, and difficulty opening a new bank account.
If you overpay your balance, this could mean you free up more available credit, leading to a lower credit utilization ratio. Lowering your credit utilization ratio could feasibly lead to a positive change in your credit score. However, overpayment in itself may not do anything to help build your credit.
You might have too much credit card debt if: Your credit card balances are accruing lots of interest. If your credit cards have high interest rates and you're carrying balances that are accruing a lot of interest each month, you may be putting yourself in a difficult financial position.
When you have a negative balance, you can request that the amount of that balance be deposited into your bank account. You can do this because a negative balance is similar to a statement credit. If you'd prefer, you can also request a check, money order, or even cash in the amount of the negative balance.
Understanding Credit Card Negative Balance and its Reasons
Also called credit card minus balance, it occurs when your credit card account balance is less than zero. This means that the credit card-issuing bank owes you money. This can occur when your account's payments or credits exceed your charges.
By closing a credit card account with zero balance, you're removing all of that card's available balance from the ratio, in turn, increasing your utilization percentage. The higher your balance-to-limit ratio, the more it can hurt your credit.
Credit Card Negative Balance and its Impact on Your Credit Score. A negative balance does not affect your credit score. The card issuer owes you money, and so, there is a reduction in your credit utilisation ratio and this has a positive impact on your credit score.