What Is a Negative Credit Card Balance and How Does It Happen? (2024)

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• When a refund is issued to your account, credit card issuers apply the refund to existing balances.
• If a credit card refund results in a negative account balance, the issuer will return the money.
• Alternatively, you could charge additional purchases to bring the balance back up to zero or more.

Introduction to Negative Credit Card Balances

Sometimes you make a purchase that doesn't work out — and luckily most companies have generous refund policies in this day and age. But what happens exactly when your credit card purchase is refunded, and how will it take to see the updated balance in your account?

Definition of a Negative Credit Card Balance

Note that a credit card refund is different than a credit card chargeback, or billing dispute. While a credit card refund is the result of a merchant refunding you for a returned item or a canceled trip, a credit card billing dispute is when you were incorrectly charged for something you didn't purchase, or if you never received an item you paid for.

How Long do Credit Card Refunds Take?

The amount of time it takes to receive a credit card refund can vary based on the issuer and the merchant you're returning an item to or canceling a travel plan with. Generally, you'll receive a card refund within seven to 14 business days.

Things to Know About Credit Card Refunds

The Refund Applies to Outstanding Balances First

The refund will go back to the card that you paid for. But first, the credit card company will pay off the balance of that card. So a $1,000 hotel refund turns into $700 if you have a $300 balance on that particular card. This is unfortunate for those who have a 0% APR credit card offer, a low-interest credit card, or a balance transfer card and would prefer the cash. When credit card companies immediately pay off the balance, it eliminates the option for cardholders to make smaller payments.

If You End Up With a Negative Balance, You Might Receive a Check

If there's a negative balance on your credit card, the issuer will send the amount back to you — but the timeline and the form of payment can vary. Sometimes money will be wired back to your account within 24 to 48 hours. In other instances, you may receive a check, which can take seven days to arrive. For people who need the cash quickly, this could be a huge inconvenience.

In most cases, you will need to contact your card issuer about your refund. It's not an automatic transaction, and for those who use their credit cards often, it may not be an issue to have a negative balance because that money will go to other purchases. Instead of asking for a refund, you could choose to spend the negative balance down to zero.

You Can't Keep the Rewards on Refunded Purchases

Finally, credit card companies will deduct any rewards points, including cash back, once a refund is processed. If the travel points or rewards have already been used, it's possible to end up with negative reward points until the points are earned back.

It's important when you're signing up for a card to read the fine print about the refund policy. It's also important to keep track of your credit card account balances and reach out to customer service with questions so you can resolve any issues quickly.

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