How does a Negative Balance Impact your Credit Score?

The credit card statement balances tend to represent the money the cardholder owes to the credit card company they are using. The different purchases, cash advances, and balance transfers tend to add to the monthly statement balance available on credit cards.

Sometimes, the card may have a negative balance, which means that the credit card owes the cardholder some money. Any cardholder whose balance shows a negative sign might be worried that it might impact their credit score. Read through this article and understand what happens to the credit score if the credit card has a negative balance.

Does Negative Balance Affect Your Credit Score?

Many people wonder if having a negative balance will affect their credit score. It is important to understand that a negative balance on credit card means that the credit card issuer owes the cardholder money, not the other way round. This means that the negative balance does not affect the credit score.

The negative balance is not factored into the payment history, so the insurer is not concerned about any payment defaulting, which means that they cannot send the payment history to the credit reporting agencies, affecting your credit score.

It means that with a negative balance, a credit holder can still have good credit scores and get loans from other lenders because they do not owe any lender money; instead, their credit card issuers owe them. However, one needs to ensure that they get their money back from their card issuer to help clear the negative balance on their credit card.


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What Causes a Negative Balance?

As a cardholder, it is important to understand that the banks owe the cardholder money anytime there is a negative dollar amount on the credit balance. One needs to continue charging more purchases to turn into a positive balance. There are different reasons why one might experience a negative balance. They include:

1. An Overpay on the Credit Card Bill

As a cardholder, you will get a negative balance if you overpay a monthly bill using your credit card. A mistake may occur when you enter an amount of money that is more than the current balance to pay a bill. When the payment is processed, a negative balance occurs.

2. After Receiving a Refund

If you make a purchase online and then decide to cancel it, the money would be refunded to the credit card but will have a negative balance.

3. Earning a Statement Credit

Receiving a statement credit on your credit card is bound to be negatively balanced. The statement credit tends to occur when one earns cash-back rewards with credit cards.

When a credit cardholder understands what a negative balance is, it helps them become aware of the impact it might have on their credit score. The SoFi’s professionals point out that if you see a negative credit card balance, it’s not something you necessarily need to worry about. Sometimes, the cardholder might think that their credit score has been affected by having a negative balance, but in a real sense, they are still safe because their card issuers are the ones that owe them.


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