A positive credit card balance is what you owe your bank issuer based on credit purchases you’ve made during a given period of time. Failure to pay off a positive credit card balance will negatively influence your credit score.
Making consistent credit payments improves your chances of getting approved for future credit cards, loans, or mortgages. Keep reading for everything you need to know about negative credit card balances in Canada.
What causes a negative credit card balance?
Overpayment on your credit card
If you have a balance of $1,000 and pay $1,200, you will notice a negative credit card balance on your account. In some cases, your issuer will restrict you from making future payments until the balance is equalized. This isn’t a punishment to you, but to protect the bank's assets until they pay you back in full.
Waived or cancelled fees
If a fee or late payment is waived but you already paid it off, this can cause a negative balance. You will see this information appear on your credit statement and on the online portal of your card issuer.
Rewards that apply as statement credits
Cash back credit cards may apply rewards directly to your statement credits. This will add additional credit payment to your account, in some cases leading to a negative balance. This can also happen if you cash out more rewards on your account than your positive balance reflects.
If you receive a refund on a purchase that you already paid off on your credit card, this can cause a negative balance. This is a common occurrence when your refund takes a few weeks to clear. However, if you receive a refund in the same credit cycle prior to payment, these charges will cancel each other out.
Fraudulent charges on your account will be reversed, applying a credit to your account balance. If you previously paid off your entire balance without checking for unexpected charges, this can lead to a negative balance. In order to avoid possibly paying for a fraudulent charge, make sure to review all of your credit statements prior to payment.
Credit scores and a negative balance
A negative credit card balance won't show up on your credit reports or payment history. As a result, this information will not be sent to the credit bureaus like TransUnion or Equifax. Future lenders will not know if you have or previously had a negative account balance.
Additionally, credit scores are calculated using the information on your credit report. Since negative balances don’t appear on reports, they won’t influence your credit score at all.
In fact, negative balances can actually work in your favour, as they they signal strong credit utilization — the amount of credit you’re using in comparison to your credit limit. Credit utilization does influence your credit score, which is why lower balances are preferable.
It’s never necessary to strive for a negative balance. It won’t provide you with any more benefits than if you paid off your credit card balance on time.
Negative credit balances don’t influence your credit limit, however, if you continuously have a negative balance to compensate for a low limit, discuss a credit limit increase with your issuer. Before deciding on a credit card, always compare your credit card options to secure the best limit and rewards.
How to handle a negative credit card balance
A negative credit card balance in Canada is not something that requires immediate action. In fact, many people choose to leave the balance on their accounts. This money will cover your credit payments until the negative balance is gone.
If you aren’t making purchases on your card, your issuer will send you a check in the mail after six months. They are legally required to compensate you for the money, so keep this in mind if you have a negative balance on a card you rarely use.
You can also request a refund, which means you’ll receive the money outside of your credit account. In this case, you can choose to move the funds into a savings or a checking account. In Canada, most credit issuers will send you a check upon refund request. All you have to do is call your issuer’s customer service line.
This isn’t recommended for small negative balances, however, it can be useful if you have a large negative balance on your account. In this case, you won’t have to spend money on your credit card to access the funds. Upon refund, the changes will show up on your balance.
Negative credit card balance FAQs
A negative credit card balance means you have overpaid on your credit card in some way. The credit card issuer owes you money if you have a negative credit card balance. Conversely, if you have a positive balance, you owe the issuer money. Future payments will pull money from the negative balance. You won’t be responsible for paying these funds off until your account is positive again.
Typically a negative account balance will stay on your credit account. If you want to use the funds elsewhere, you’ll need to ask for a payment refund from your issuer. This will typically be mailed to you within a few business days. The status of your negative balance will then be updated.
No, having a negative account balance is not bad, nor does it have any repercussions for the credit holder. Your credit score, limit, and report will not be impacted.