What Is A Negative Credit Card Balance
A negative credit card balance is when your balance is below zero. It appears as a negative account balance. This means that your credit card company owes you money instead of the other way around.
Typically, this happens when you’ve overpaid your outstanding balance or if you’ve had a credit returned to your account. A common example is if you make a purchase with the card and later return the item, where you then are issued a credit back to your account. Let’s say you bought a $25 dress. You returned the dress, and the $25 is credited back to your account that has a zero balance. Now, your account balance is – $25.
Keeping Track Of Your Credit Limit
But thatâs just the start. Knowing how your credit card works can also help you use it responsibly. You can find out more about by reading Capital One articles about the importance of credit, and payment grace periods.
Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.
We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.
Do I Need To Get My Credit Score
It is very important to know what is in your credit report. But a credit score is a number that matches your credit history. If you know your history is good, your score will be good. You can get your credit report for free.
It costs money to find out your credit score. Sometimes a company might say the score is free. But if you look closely, you might find that you signed up for a service that checks your credit for you. Those services charge you every month.
Before you pay any money, ask yourself if you need to see your credit score. It might be interesting. But is it worth paying money for?
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How Do I Get Credit
Do you want to build your credit history? You will need to pay bills that are included in a credit report.
- Sometimes, utility companies put information into a credit report. Do you have utility bills in your name? That can help build credit.
- Many credit cards put information into credit reports.
- Sometimes, you can get a store credit card that can help build credit.
- A secured credit card also can help you build your credit.
Other Tips For Managing Your Bill
Aside from keeping an eye on your credit utilization and making a payment when it starts to get too high, here are a few other pointers for managing your credit card bill:
Keep a budget and track your spending. This way, youll keep from spending more than you can afford to pay off in one month.
Sign up for text or email alerts from your issuer to keep tabs on your balance and your billing due date.
Review your statement carefully every month. This will help you spot and correct unauthorized charges if they arise.
Set up automatic payments. This can help you avoid accidentally missing a payment due date.
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Where Do I Get My Free Credit Report
You can get your free credit report from Annual Credit Report. That is the only free place to get your report. You can get it online: AnnualCreditReport.com, or by phone: 1-877-322-8228.
You get one free report from each credit reporting company every year. That means you get three reports each year.
Your Overpayment May Be Considered Fraud
Overpaying your credit card bill by a small sum will often result in a negative balance on your account. However, overpaying by a significant amount may be a fraud trigger for your issuer.
Sometimes overpayment of large sums can be the result of mistakenly adding an extra zero to your payment. But it is also a potential sign of refund fraud or even money laundering. Overpaying by a large amount may cause your issuer to freeze your account while investigating the issue or even closing your account altogether.
You can generally resolve an overpayment issue by calling your issuer and explaining the mistake. Once you verify your identity as the primary cardholder and explain the error, your card should be reactivated or your account restored.
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Cnbc Select Explains How A Credit Card Balance Works So You Can Familiarize Yourself With This Important Term On Your Bill
Selects editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.
A credit card balance is the total amount of money you owe on your account. However, you may not know exactly how card issuers calculate what you owe or whether it’s good to carry a balance.
Below, CNBC Select explains how a credit card balance works, so you can familiarize yourself with this important term on your bill.
Do Credit Card Issuers Verify My Income
Usually, no. Credit card banks make their decision solely upon the income and expense information you provide.
When you apply for a large loan, the bank will ask for proof of your income from pay stubs, W-2 forms or copies of your tax returns. Because the credit limits on credit cards are usually lower than a car loan or a mortgage, the issuing banks usually do not go through the hassle of asking for income documentationthey just ask.
So why does the bank trust you? Whats to stop you from saying you earn $100,000 a year when you only earn $20,000?
Its because the bank is simply covering its butt. The bank doesnt want to be accused of maliciously lending you money you cant afford to repay, so it asks you for your income. Lets say that you default on your credit card debt and the bank has to take you to court. If you could, in fact, prove to a judge that the bank lent you money it knew you couldnt repay, you might be able to get out of the debt. If, however, the bank can provide written proof that you stated your income was at a certain level, the judge will find you responsible for paying the debtregardless of your actual income.
Bottom line: Dont lie about your income on credit applications!
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Managing Money With Your Credit Card
To make your credit card work for you, think of credit as a tool to help you reach your goals. One of the great values of carrying an RBC Royal Bank credit card is having access to an interest-free loan on purchases, so long as you pay off your balance in full each month.
Responsible use of your credit card is an excellent way to build a solid credit rating. Your credit rating helps financial institutions determine your suitability for mortgage approval on a new home, a new car loan, financing for a college or university education, or a loan for a dream vacation.
In order to get your finances in order, you may need to consolidate your debt. Department stores and gasoline cards have higher interest rates. One way to begin is to transfer balances from higher interest credit cards to an RBC Royal Bank credit card. The advantage is that you will then have a lower interest, single monthly payment to manage. And that makes sound financial sense. See more information on RBC Royal Bank credit cards.
BalanceProtector Premiere® Plus Coverages for Your RBC Royal Bank Credit Card Balance
What Is The Difference Between Current Balance And Statement Balance
Seeing several dollar amounts on your credit card statement can be confusing and make it less clear what you’re actually obligated to pay when your payment comes due.
Here are the terms you’ll likely see and what they mean:
There are also two dates to pay attention to on your credit card bill: your statement end date and your payment due date. The difference between the two is called a grace period, during which time you don’t accrue interest on the statement balance. If you pay the statement balance in full during the grace period, you won’t owe any interest on those purchases. If you don’t pay the entire statement balance, however, the remainder of the balance will start to accrue interest as soon as the grace period ends.
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Paying Early Also Cuts Interest
In general, we recommend paying your credit card balance in full every month. When you pay off your card completely with each billing cycle, you never get charged interest. That said, it you do have to carry a balance from month to month, paying early can reduce your interest cost. That’s because the interest you’re charged is based on your average daily balance.
Say you come into a month with a $1,000 balance on your card. If you paid, say, $400 of that balance on the last day of the month, your average daily balance for the billing period would be about $987. If your credit card had a 15% interest rate, your interest charge for the month would be about $12.33.
Now say you paid that same $400 halfway through the month. In that case, your average daily balance would be $800 and your interest charge would be $10. You cut your interest payment by about one-fifth just by moving up your payment date.
Foreign Currency Conversion Charges
Financial institutions calculate foreign currency charges in different ways. Some transactions are converted directly into Canadian dollars. Others may be first converted to U.S. dollars and then to Canadian dollars. The foreign currency conversion charge is applied after the purchase is converted to Canadian dollars.
Example: Foreign currency conversion charge calculation
Suppose you made a 1,000 purchase with your credit card. The exchange rate is 1.42 to convert euros directly to Canadian dollars. Your credit card agreement shows a conversion charge of 2.5%.
After your financial institution converts your 1,000 purchase to Canadian dollars, it will cost $1,420. The 2.5% foreign currency conversion charge is applied to the $1,420 for a fee of $35.50. The total amount of your purchase is $1,455.50 in Canadian dollars.
Read the terms of your credit card agreement for the total foreign currency conversion charge. Ask your financial institution about anything you dont understand.
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Example: Interest Rate Increase
Say you have a promotional interest rate of 4% for the first 6 months that you have a credit card, which will increase to a standard rate of 19% after the first 6 months. But because you miss your minimum monthly payments during the first 6 months, your interest rate increases to 24%. This would seem like a 20% increase over the promotional interest rate.
Check with your credit card issuer about how much your interest rate will increase if you miss your required monthly minimum payments. This information is usually provided in your credit agreement or information box included in the credit card application.
Federally regulated financial institutions such as banks must notify you before an interest rate increase takes effect.
What Should I Expect After I Apply Online
- Once you apply online you will receive an application ID and a phone number you may call to check the status of your application if you are not instantly approved.
- If you are not instantly approved, we will mail you a credit decision within 5 to 7 business days.
- If you are approved, you will receive a mail package with information intended to help you better understand your credit report and a copy of the applicable Wells Fargo Privacy Notice. Your credit card, additional information on the card features, and terms of the account will be arriving in a separate mailing soon afterwards.
- If you are not approved for a new account, you will receive a written explanation of why we were not able to grant you credit at this time.
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A Credit Card Balance Is The Total Amount Of Money That You Currently Owe On Your Credit Card Account And That Will Carry Over If Not Paid Before The Next Billing Cycle
Your balance changes based on your account activity. When you make a purchase, your balance increases. When you make a payment, it decreases.
Purchases arent the only factor that can add to your current balance. A credit card balance can also include other charges incurred during the billing cycle, such as
- Cash advances
- Interest charges
If you cant pay your bill in full and on time each month, the rest of the balance carries over to the next billing cycle. You build up interest charges on the portion of your balance that isnt paid on time. As a result, its generally a good idea to pay off your balance on your credit card each month and avoid carrying it over. If you dont, youll spend more on your purchases in the long run, depending on how much interest accrues. And carrying a balance could also negatively affect your credit.
Read more to learn about the impact that carrying a credit card balance can have on your financial health.
The Importance Of Credit Diversity
Having a majority of your debt concentrated within one type gives your credit a lack of diversity, reflecting poorly on your credit score. Plus, this concentration being credit card debt rather than other types, often characterized as good debt, means you likely wont have a healthy balance of good and bad debt.
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Additional Payments On Top Of Automatic Payments
Another common way that credit card bills get overpaid is when people make a manual payment when they have automatic payments set up. Most card issuers offer the option to set up autopay for your monthly bill. This is a great feature because it removes the stress of remembering your bills due dates. Youll never pay a late payment fee when autopay is turned on since the card company will withdraw the money from your bank account for you.
If youre like me, you sometimes like to pay off your credit card balance during the month without waiting for your statement to come in. If you have automatic payments turned on, this can result in excess payments. If your autopay is scheduled to go through on the 2nd of the month, and you make a manual payment on the 1st, the system might not recognize that your cards balance has changed. Your automatic payment will then go through for the cards old balance.
What To Do About A Negative Balance On A Credit Card
If you notice you have a credit card with a negative balance, don’t fret. You don’t really have to do anything. But there are a few simple actions you can take if that will give you peace of mind:
- Contact customer service: If you’re not sure why you have a negative balance, contact your credit card issuer for an explanation.
- Request a deposit: Check with your credit card issuer to see if you can request the negative balance amount to be deposited to your bank account. You can also ask for a check, money order or cash.
- Make a purchase: This is the easiest way to resolve a negative balance. Say you received a credit of $50, and your balance is now – $50. Once you spend $50, whether on one or multiple purchases, your balance will be zero.
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Use Your Banks Mobile App
Download your credit card companys app on your mobile phone, and youll access your account and see recent transactions, payments and balance. You can even make payments or chat with a customer service representative.
Avoid storing your password, and possibly even your username, on your mobile app. Anyone who picks up your phone can access your account if its not protected.
What Happens If You Go Over Your Credit Limit
If you go over your credit limit, a few things could happen. The first is that your card could be declined when you try to use it.
You could also be charged a fee if youâre part of an over-the-limit coverage program, according to the Office of the Comptroller of the Currency. But that program is optional.
If you opt into the program, you could be charged a fee each billing cycle you go above your credit limit. Before you opt in, your credit card company must tell you how much the over-the-limit fees will be.
You can contact your credit card company to check your status. And if opted in by mistake, you can change your preference at any time. But you could still have to pay any fees that were already charged. And if your balance stays above your limit after you opt out, you may be charged additional fees too.
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