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Most of us today have made credit cards a part and parcel of our everyday lives. We use them for a variety of purposes and enjoy the numerous benefits they afford us. They have made our lives extremely convenient with their efficient new way of making payments. However, most of us still don’t understand every nitty- gritty detail associated with using credit cards. One such tiny detail is the presence of negative balance that often leaves most of us bewildered and even scared that it might negatively impact our credit history. So, what exactly is this negative balance on your credit card account and why does it show up?
If you witness a negative balance showing up in your credit card account you need not get scared. A negative balance simply means that your credit card provider owes you money. Surprised? How can the card issuer owe you money when it generally the other way around? Well, don’t worry, we’ll get to it in this article a little further.
For now, you should know that a negative account balance occurs for many different reasons, but for whatever reason, it happens, having the balance on your credit cards go below zero is not necessarily a bad thing. On the contrary, it simply means that you have a credit on your card’s account. In other words, it just implies that the card holder has paid an excess amount on their total payable amount of the credit card. This means that any future purchases made up to that specific amount will not cost you a thing. Hence, the shopaholic in you can rejoice!
Let us dig deeper into why and how a negative balance on credit cards occur and what are its effects on your credit limit, your credit score as well as what can be done to bring this balance back to being above zero:
It is possible to have a negative balance or as it is also known as a credit balance on your credit card account for a variety of reasons. We have tried to list down some of the most common ones below-
Other notable reasons include-
While it might seem that having a negative account on your credit card is a bad thing for your credit score but in reality, it hardly makes any difference. This means that a negative balance does not really hurt or help your credit score. This is due to the fact that the credit scoring models consider any negative balances on your credit account just like they would if you had a zero balance.
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However, even though a negative balance will not impact or change your credit scores, it will certainly have an impact on how much you can spend using your credit cards temporarily. It will despite this not raise your credit limit.
Let us take an example to elucidate this better- If you have an AED 5,000 credit limit on your credit card but your credit balance is AED 100, you will be able to spend up to an amount of AED 5,100. This does not however mean that you are getting a higher credit limit technically. This is because as soon as you spend those extra AED 100, your card balance will be zero, letting your credit limit be fixed at AED 5,000.
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In case you have a negative balance showing up on your credit account, the easiest and simplest way to bring it back to zero is by making new purchases. For instance, if your account shows a negative balance of AED 50, add that amount to your future purchases. By making purchases worth AED 50, your balance will automatically return to zero. If not, it will certainly reduce your next credit card bill by AED 50.
On the flip side, if your negative balance is huge and you have to pay some other bills or you simply don’t want to make any new purchases using that credit card, you can directly ask your credit card provider for a refund. Legally, the credit card company is required to refund credit card balances within 7 working days after they receive a written request for the same.
The requested refund might be offered to you as a cheque, cash, or even as a money order. However, in order to receive this refund on your credit cards, you will have to supply your current address and phone number to the credit card provider. If the current contact information of the card holder is not supplied, the credit card issuer does not have to take any further action according to the law.
While we are talking about negative balances, let us take a second to discuss the positive balances on your credit card account so that there is no confusion remaining regarding this issue. Having a positive balance on your account simply means that the card holder has a certain payable amount that is due. If you pay the total due amount within the due date each month, no interest will be levied on your account and it will be reflected as a positive balance on your credit card account. Furthermore, your account will continue to show a positive balance as long as you continue to pay even the minimum due amount with discipline.
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The Bottom Line
There is absolutely nothing to worry about if your monthly bill depicts a negative credit card balance since it is not your fault in the least. This is sometimes beyond your prowess and will therefore have no negative impact on your credit history. So you can leave your worries behind and perhaps indulge in some shopping adventures in order to bring your account balance back to zero!