Not all the negatives in your life are necessarily bad.
Sometimes they come in the form of a negative balance on your Equifax credit report. And, which obviously isn’t something you have to worry about much.
Why is that so?
Firstly, a negative balance isn’t something hurtful for your credit score. In fact, it’s more like good news for you. Because how often have you seen a credit company be the debtor to the consumer?
Yes, literally, once in a blue moon.
So, what exactly is a negative balance? How does it differ from a positive balance? And most importantly, how can you make negative balance work in your favor?
You’re about to find out!
What Is A Negative Credit Card Balance?
You paid your payments on time and did something to improve credit score in the previous month. However, instead of a $0.01, you saw a minus sign with your amount when you opened the credit app.
You’re familiar with the positive credit, which you have been clearing every month but now what even is this? A negative credit! What does that mean?
- Should you be alarmed?
- Did something go wrong with your credit?
- Did you miss an entire payment, and that’s why it’s negative now?
No to all of that. Hehe. Take a deep breathe and read what it means to have a negative credit balance :p
A negative credit balance is an amount your credit company owes you!
Huh? As simple as that? Yes! Here’s how it’s different from your typical credit, aka, positive balance:
Negative Balance Vs. Positive Balance
A credit card balance is an amount that adds up to your account history as the money you owe to your credit company (based on Investopedia). This is then categorized further depending on how you use your card:
|
Positive Card Balance |
Negative Card Balance |
|
The money owed to the credit card company by the consumer
|
The money owed to the consumer by the credit card company
|
|
Increases as per your purchasing |
Increases as per your overpayment or company’s credit rewarding policy |
|
Decreases as per your monthly payments |
Decreases as per your credit balance use |
|
E.g. $140 |
E.g. -$200 |
What Is The Cause Of A Negative Card Balance?
Image Credits: Freepik
As we said earlier, a negative balance technically makes your credit company the ‘debtor.’ But does it also make you a faulty person to get a credit card?
Like, it only makes sense; otherwise, how is that even possible? Ah, what in the reverse UNO card is this? You don’t need to be pulling out your hair or start looking for the stars literally during the day. :p
Relax and let us do the explaining (or the credit reasoning)!
1. You Might Be Overpaying!Surely, you must have wanted to build credit quickly to do that. :p
Oops, it didn’t help you get a good credit score in Canada, USA, Uk, or other regions, but instead, your account ended up getting a negative balance.
- For example, your account’s positive balance was $650, but you paid $850 to the company last month. So, now, your account's updated balance will be -$200 and not $0
Any additional amount other than the actual balance will show up as a negative credit on your account. So, can it help increase your credit score or credit rating?
According to Raychelle Heath, it’s only a myth that overpayment can help your credit score. Hence proved it will only increase your credit balance. :p
2. OOH, Is It The Statement Credit?Some cashback, reward, and travel credit cards accept to redeem the points as a statement credit. So, there’s a chance you overlooked the awarded credit and paid the amount in full.
However, the statement credit will still show as a negative balance as it’s something you overpaid.
3. It’s A Refund, Folks!As per the surveyed results by Fundera, 80% of people are most likely to use cards for transactions, and among those, 45% preferred to use their cards for online transactions.
So, if any online store or merchant reverted your online payment to your credit card in case of a wrong product or other reason, it will likely show as a negative balance.
- For example, you had plans for traveling before the pandemic and bought a ticket to visit your childhood village. You paid the ticket fare online with your credit card. Later, you cleared the payment monthly
- Sadly, the ticket got canceled due to all the COVID-19 situations, and your plan got all messed up. But, one good thing happened, the company refunded your money as a ‘negative balance’
So, all the refunded money can also be shown as a negative balance on your credit card.
4. Uh, Can It Be A Reverted Fee?Any reverted fee you had already paid will most likely come as a negative balance to your account.
It can be due to a wrongly charged interest fee, or the company wanted to show some great customer service and decided to send it back.
- For example, you had been a good credit user, but you missed your last payment due to some financial issues.
- Your credit interest went up higher, yet you managed to cope with it for two months but decided to talk it out with the company.
- Luckily, it worked out! So, as a gesture of good service, your company decided to revert the two-month high fee, which shows a negative balance on your account.
Yes, you can get lucky with such incidents if you clearly explain the situation to your credit card company. Good luck!
5. It’s A Credit Mistake!The last but not least reason behind your negative credit balance can be a credit error by your company or the lender.
There’s a chance they issued the wrong balance while updating your payment history. Or, it can also be a wrongly deducted charge which is again a mistake by the company or the owner.
- For example, you used your Visa card to buy a lottery ticket at a grocery store. But, instead of $6, you were charged a $10 payment. Upon calling the company, you were informed it was a ‘cash advance fee,’ which was a mistake on their end for taking the lottery as a cash advance.
Now that you know the reasons behind your negative balance, the next question that comes to mind is how it can affect your credit score? And, will it show on your credit report? Here are your answers:
Can Negative Card Balance Affect Your Credit Score?
If you worry about a negative balance hurting your credit score, rest assured. It won’t affect your credit score. Yes, which means it won’t increase or decrease your score.
Of course, it will show on your credit account and credit history. But, no, your credit report won’t include it.
So, if you decide to check your credit score on any of the top credit bureaus reports, it will be devoid of the negative balance.
Can Negative Card Balance Affect Your Credit Limit?
As your credit balance is directly related to your credit limit, it is only fair we clear another confusion here.
So, can your negative balance affect your credit limit? Before answering that, let us clear one thing:
A negative credit balance is not equivalent to a lower credit limit!
Yes, the minus sign doesn’t indicate that you’re falling behind your credit limit as compared to your spending. It simply means that it’s an additional amount you can use.
Here’s how it can impact your credit limit:
- Your negative balance can’t increase or decrease your credit limit permanently
- The negative balance may temporarily increase your credit limit
As we explained above, it’s only an extra amount you can use that explains our second point.
For instance, your credit limit is $500, but you have $200 as your negative balance. It implies that your new limit can be $700 for the month as you can spend the extra $200 without the interest.
Bottom Line
That’s it from our side, credit enthusiasts!
There you have it, a complete and comprehensive guide with everything you need to know about the negative credit card balance.
So, next time you see a minus sign with your credit amount, don’t go in full panic mode. Instead, be happy and carefully spend the extra money you’ve got.
Lastly, did you enjoy reading this article? What do you want to read next? Let us know in the comments below. If you like such helpful content, visit our Plastk Blog section to start your journey to become a credit expert!
