A negative credit card balance refers to the amount of money that the credit card company owes you, often after you’ve paid more than your current balance.
Your first impression of seeing a negative balance might trigger you, like maybe you’ve done something wrong. But in most cases, it means your credit card issuer owes you money.
There are many reasons to have a negative balance on your credit card account, but in most cases, it's a good thing. It usually means you have credit on your account which you could use for future purchases.
A negative balance can deliver a small windfall, which is handy for a one-off splurge. And if you carried a balance in previous months, a negative balance can translate to an improved utilization rate, which can usually boost your credit score. A better score can bring all sorts of good things.
But credit bureaus won’t reward you just for a negative balance. They treat it the same as a zero balance. For frequent card users, the negative balance doesn’t last long, regardless, so even its impact on your utilization rate is bound to be short-lived.
A negative balance rarely delivers a higher credit limit too. Your limit remains the same while your balance is negative.
For example: If you have a credit limit of $10,000 and a credit balance of -$1000, you’ll have a total of $11,000 to spend. But your available balance will return to $10,000 as soon as you’ve spent the negative balance.
You have a few options to bring back a negative balance on a credit card to a zero balance:
In late 2021, the average credit card balance in the US is $5,525. That number has gone down significantly over the last two years. In 2020, the average balance stood at $5,897, and in 2019, it was $6,629 (11% higher than in 2021).
Benefits of using Bright to manage your credit card payments.
When you use Bright to make card payments for you, your Bright Plan will account for a negative balance and adjust your payments automatically.
Bright is a smarter, faster way to manage your credit card debts. Powered by MoneyScience™, a new patented system built on 34 algorithms, Bright studies your finances and makes smart payments for you, always on time and always optimized to save on interest charges. With Bright, you'll pay off credit card debts faster, automatically. No more late fees and juggling payments.
If you don't have it yet, download the Bright app from the App Store or Google Play. Connect your bank account and your cards, set your own goals, then let Bright get to work.
With a postgraduate degree in commerce from The University of Sydney, Pranay has his finger on the pulse of the finance industry. Breaking down complex financial concepts is his forte.