What Does a Negative Balance on Your Credit Card Mean?

Picture this: you open your iBanking app, click into your latest credit card statement and a negative number stares back at you. You may experience confusion upon seeing this figure, but don’t panic. A negative balance is a good thing as this means that your card issuer owes you money instead of the other way around!

Think of it like stumbling upon some unexpected cash you had completely forgotten about – a pleasant surprise in the digital world. So, what's the deal with this happy little accident? Let's dive into what a negative credit card balance means, how it happens, and what your next steps should be if you find yourself in this fortunate situation.

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So, what is the deal when your credit card shows a negative balance, or a credit balance? In simple terms, it means your credit card company owes you money. This situation arises when you have paid more into your account than what you owe.

Here are a few reasons you may end up with a credit balance:

• You received a refund from a merchant. Maybe you recently returned a purchase you were unsatisfied with and got a full refund back to your credit card. Maybe you accidentally carted out the wrong item and asked the merchant for a refund, which just came in. If the refund amount is more than what you currently owe, you will see a negative balance.

• You overpaid your bill. Whether intentional or by accident, you may have keyed in a payment amount higher than your statement balance when paying off your last bill. Some people find that overpaying their credit card bill helps them with budgeting.

• You redeemed rewards. Credit cards usually credit the cashback you have earned at the end of your statement cycle. If you have accumulated more cashback than you have spent within any given cycle, that could be the reason for your negative balance.

To better illustrate how a credit balance could be possible, let’s imagine you paid off your POSB Everyday Card bill early. The next day, you receive a $100 refund from a merchant. This means that you will see -$100 on your credit card statement, which you can then use to offset your next purchase(s)! 

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Now that you have got a negative number staring back at you on your credit card statement, you may be wondering what you can do with that credit. You have a few options, but if getting cash back is your goal, keep in mind that each card issuer may have its own set of rules.

Your first option, and the one most people go for, would be to go shopping. The easiest way to use up that negative balance is simply to make purchases with your card as the cost of whatever you buy will be deducted directly from that negative amount. You won't need to make a separate credit card payment until your spending exceeds the credit balance you have.

Alternatively, you can request a credit balance refund. Some card issuers, such as DBS, will let you get that negative balance back as actual money. This usually comes as a direct deposit into your bank account. Your best bet is to get in touch with your card issuer and ask them what your options are, but take note that a credit balance refund usually requires you to be in good standing with the bank (i.e., you have a good credit score and make debt repayments on time).

Take note that if you intend to close a credit card but there’s still a credit balance on it, you should request for that amount to be refunded to avoid any complications down the road.

Wondering what a negative balance does to your credit score? The answer is: Absolutely nothing – your credit score will neither be harmed nor boosted. 

Financial institutions don’t treat negative balances as extra trustworthiness when you apply for financial products. For one thing, when you request for a credit report from Credit Bureau Singapore (CBS), a negative balance isn’t going to earn you any bonus points. Ultimately, what still matters most is your payment history and total credit utilisation.