Have you noticed that there’s a negative balance on your credit card and aren’t sure what it means? Perhaps this is your first time seeing a credit card balance and are feeling a little confused? Or are you curious and want to know more? Whatever your reason, we have an answer for you!
We know just how confusing a credit card balance can be, especially when you see negative balances displayed. You start to worry, does this mean you have spent too much? Do you owe more than you realize?
Have you made a mistake? These questions keep you up at night and no matter what you do, you can’t seem to find the answers that you need.
Well, no more! Today we are here with the answers you need. Keep reading to find out what a negative balance on your credit card means, what causes it, and if it’s a good thing or not. Get ready to become an expert in credit card balances!
What Is A Credit Card Balance?
Before we get into it, let’s have a quick recap for those in the room that need it. A credit card balance is the total amount that you owe on the credit card. So if you have used your card to spend $200, you will have a balance of $200.
You can view this amount on any online banking apps you use for your credit card, or by requesting a balance from your credit card company.
This is slightly different from your statement which you will receive monthly telling you how much you need to pay towards your credit card every month.
This will have the total amount owed (your balance), the minimum payment required, and a breakdown of any interest rates or charges you might incur.
Remember to avoid any interest charges it is best to pay your credit card off in full every month unless you are currently in an interest-free period.
Now that we have covered what a credit card balance is, let’s take a look at what a negative balance can mean!
What Does A Negative Balance On A Credit Card Mean?
A negative credit card balance happens when your balance dips below zero. So you could have a balance of -$10 showing on your banking app or balance slip. This can make us panic, but it shouldn’t as it means the credit card company owes you money! So how does this happen?
Usually, it happens when you have paid more than you should have on your credit card. So if your balance due was $200 but you paid $204, you would have a new balance of -$4.
This means you can spend the four dollars on the credit card and the balance will return to zero and anything more than the four dollars will be money that you then owe the credit card company.
We can also see negative balances if you have credit returned to you. Say you purchase some shoes on your credit card and pay the balance off in full straightaway. But later, you find the shoes don’t fit or they are faulty.
You return the shoes for a full refund with the money going back on your credit card. This will be displayed as a negative balance as you have already paid your credit card.
It’s nothing to worry about if you frequently use your credit card, you can simply spend the money, return the balance to zero, or spend more than the negative balance.
When you spend more than the negative balance, your balance will be shown with no minus sign in front of it. So if you had a negative balance of -$25 but went shopping and spent $50 on your credit card you would have a new balance of $25 that you will need to pay your credit card company on or before the due date stated on your statement.
It can be a little confusing, so try to consider it as any negative money on a credit card balance is yours to spend, and any without a negative sign in front of is money to pay the credit card company.
Is A Negative Balance On A Credit Card A Good Thing?
So can a negative credit card balance help in any way? It does look as though you pay your bills off (and then some!), so surely that can help your credit score? Well, not really.
A negative balance on your credit card is a neutral situation. It’s not going to hurt your credit score, but it isn’t going to boost it either. So you don’t need to worry if it happens but know that it isn’t going to help boost your credit score.
This is because most of the credit scoring models used by bureaus consider a negative balance as having a balance of zero. As we know, a balance of zero would show that you either haven’t used your credit card or have paid off the full amount.
When it comes to boosting your credit score with a credit card, you will want to make payments or purchases with the card and then pay the full amount off on time.
This shows that you can be relied on to make payments on time and in the right amount, and prevents you from having to pay any interest charges. When using a credit card to boost your credit score remember to only make purchases that you can afford to pay off!
And there you have it, a negative balance on a credit card means you have paid more than you need to, and that the credit card company now owes you money!
You can spend this money the next time you use your card to work back towards a zero balance, or continue to spend and pay the difference when your next statement comes in.
Remember to only spend what you can afford to pay off on your credit card and to seek financial help should you run into any difficulties.