Maybe you hit the wrong key as you were making your payment. Maybe you've been refunded on a returned purchase. Maybe you paid twice in error. Regardless of how it happened, you've overpaid your credit card and are now looking at a negative balance on your statement. Overpayments happen more frequently than you probably realize. Luckily, there are several ways to correct the oversight and get your money back. If you've got an overpaid credit card, here's what to do.
What is a Negative Balance?
If you paid a credit card provider more than you owe, your statement will show a negative balance. All this means is that the provider owes you money, rather than the other way around. More often than not, this doesn't mean you've done anything wrong. Usually, it's the result of a payment that's been made by mistake (perhaps you set up an automatic payment too soon after making a manual payment), a refund on purchases, or a simple typo. As forbes.com writes, a negative balance won't usually do you any harm. It won't affect your credit score and it's not going to put you in the provider's bad books. None-the-less, it's not something you should be actively pursuing. Having money tied up into a credit card won't help your credit score. It won't accrue interest in the same way as it would on a savings account, and it's not going to help you build your wealth. It's also not as easily accessible as money on a regular account, meaning that if you find yourself suddenly in need of the money, you might have to wait to get it.
Why You Should Try to Avoid a Negative Balance
A negative balance is usually the result of some form of error or a situation outside of your immediate control. However, if you're laboring under the assumption that deliberately making overpayments is doing you some kind of good, it's time to stop. Some of the reasons to steer clear of an overpayment include:
It Might Be Treated As Fraud
As bankrate.com notes, a small overpayment will do little more than result in a negative balance on your account. However, a significant overpayment may act as a fraud trigger to your card issuer. While most large overpayments are the result of adding an extra digit to the payment amount in error, they can also be seen as a red flag. Significant overpayments are both signs of potential money laundering and refund fraud. If your provider suspects either one, they will freeze your account before proceeding to investigate. Some may close your account altogether. If this happens, contact your issuer immediately. If the overpayment was the result of a simple oversight or has some other innocent explanation, most issuers will reactivate your account once the situation has been explained.
You Won't Benefit
Overpaying a credit card bill by a small amount won't have an adverse effect on your account. But neither is it going to have a positive effect. If you overpay in the hope of restoring the damage done by missed or late payments, you're out of luck. Your credit score isn't going to take a leap in the right direction as a result of a negative balance. Neither will it improve your credit utilization score. Worse still, the overpayment will essentially be sat on your credit card doing nothing until you spend it. Regardless of how significant the overpayment, it'll earn zero interest while it's on your credit card. If you have money to spare, you'd be better advised to put it in a high-interest savings account where it'll actually help accrue wealth.
What To Do If You Overpay Your Credit Card
If you make an overpayment in error, you have several ways to resolve the situation. You can:
If the overpayment was small, most people will simply prefer to do nothing and allow the credit to roll over towards any charges they make or towards next month's charge. Providing you still use the card or still have an outstanding balance, this is usually the easiest way of dealing with the situation.
Request a Refund
If your overpayment was for a significant amount or if you don't intend to use the account again, you can request a refund from the provider. Some providers will allow you to request the refund by telephone or your online account, while others require the request in writing. Check with your provider directly if you have any concerns over which request type is accepted. Once they receive your request, the provider is legally obligated to follow up within 7 business days. Refunds may either be paid directly into your bank account, or issued as a money order, check, or cash. Your provider should let you know when the refund will be made: if you don't receive it within the set time frame, contact the provider in case a processing error has been made.
Can I Cancel a Credit Card Payment?
While some overpayments are made in error, others may be intentional. If you paid the balance in full rather than the minimum amount required, you might now be regretting the decision. But can you request a refund in these cases? As creditcards.com notes, the answer is... it depends. Technically, banks are under no obligation to refund a payment that doesn't result in a negative balance. If your balance is showing a zero rather than a minus, it is at the discretion of the individual provider whether they refund any money paid over the minimum payment. In the first instance, speak to your provider. As a zero balance won't accrue interest charges, some will be willing to accommodate your request as it also benefits them.
How to Avoid Future Overpayments
Some overpayments are unavoidable. If you receive a refund on a purchase after having already made a payment, or if any fees are canceled in error, then your account may end up showing a negative balance without there being anything you can do to avoid it. However, there are certain things you can do to minimize the risk of making an overpayment in error. Number one? Enable autopay on your credit card. This will allow automatic payments to be taken from your account, reducing the risk of anything going wrong during a manual payment. Autopay can be set to pay the minimum payment due, the full balance, or a fixed amount, depending on your preference. It will also let you set the date that payment will be taken so you can reduce the risk of a forgotten or late payment.
Written by Allen Lee
Read more posts by Allen Lee