Mechanism Of Negative Balance On Credit Card


A credit card is just opposite version of the debit card, which we frequently use to withdraw money from ATMs. In the debit card, credit balance means the amount deposited in your account, and debit or negative balance means an overdraft or minus balance, which is generally not allowed. But contrary to it, credit card behaves in just reverse order. Here positive or credit balance means the amount borrowed by you, and negative or debit balance means there is some extra money which you can spend or use otherwise before the balance of your credit card becomes zero.

Above situation may also be understood by the example of deposit and loan account. In the deposit account, the credit balance is deposit money and debit balance is over drawl. Whereas loan account behaves in just reverse order, and here debit balance depicts loan amount and credit balance shows overpayments of the loan.

Likewise, if your credit card shows a negative balance, it means that much amount is in credit mode for you and the card issuing agency owe you that much of amount.

To understand the whole process more clearly, you just imagine that when you purchase something by using your credit card, the same amount is shown as credit card balance. In other words, now you owe that much amount to the card issuing agent. Now when you pay off that amount, the balance of your credit card becomes zero. But if you pay more amount than you actually owe (credit card balance), the difference amount will be shown as the negative balance of your credit card.

Becoming credit card balance negative may also be explained by a mathematical example. Let us assume outstanding balance on a credit card is Rs.500/- and payment of Rs.400/- is made. Then claim a statement credit towards travel expenses of Rs.300/-. Then the final balance of the credit card will be –Rs.200/-

Methods By Which It May Occur:

  1. A negative balance in your credit card may occur when you return a purchase and its price comes back in your credit card account, resulting in the negative credit card balance.
  2. Credit card balance may also become negative when some kind of fees is refunded, which was charged earlier. It may include annual fees, late fees, interest or other charges.
  3. Another reason for negative credit card balance may be coming back the amount previously charged due to an error or fraud.
  4. Even one more cause of negative credit card balance may be a credit granted by the card issuer as part of a bonus or promotion amount. It also may be reward points redemption amount.