Most of the time when people make mistakes with their credit cards, they might forget to make a payment. But other times, people accidentally pay too much. I’ve seen it happen first-hand.
My friend’s wife took their stack of bills off their entry table and began to process them. She came to his credit card statement at the bottom of it but didn’t look at the date of the bill. As it turned out, it was an old bill. He had already made a payment online. But since that payment, he’d spent more. So, the balance she saw was not what he owed anymore. It was less.
Not knowing this, she mailed off a check. When he checked their bank statement online later that week, he was confused as to why the credit card company had charged him the exact same amount as the billing cycle before. It took a few moments to put the pieces together. My friend wound up with a negative credit card balance.
That’s not necessarily a bad thing, though you don’t want this kind of scenario to pop up often. Granted, for him, it was a relatively small amount so he did nothing, if you accidentally go to pay $150 on your credit card to cover your charges for the month and you input $1,500, you’re not going to be very happy about that.
You’ll want it back and guess what? You are entitled to more than a credit like my friend took. You’re entitled to a refund if that’s what you want. In the case of my friend, it was about $75 over which he was spending on something else anyway, so it all worked out. But in that example of overpaying $1,350, you will likely want to get your money back and you can, thanks to Regulation Z. It’s a rule the Federal Reserve Board passed that requires every lender to disclose every term in their loans. If you overpay by $1 or more, you now have a credit balance and the institution must either refund or credit your account.
If your next statement for your credit card shows a negative balance, that means you paid too much with your last payment. It doesn’t matter if you paid online and typed it in wrong or you wrote it wrong on a manual check, this is required by law. So, keep reading and discover your rights!
Here’s how you ended up with a negative credit card balance
You might be wondering how it’s even possible to wind up with a negative credit card balance. How could you overpay your credit card bill? In the example above with my friend, while that’s a little less common, it does happen in many other ways:
- Manual payments
- Additional payments on top of automatic payments
- Refunds and credits
Keep reading for more details on each of these.
– Manual payments
By and large, this is the most common way people end up overpaying on their credit card bills. The margin for human error is huge. If you’re paying online, you will usually be given a choice for how much you want to pay. There’s always a choice for the full amount and the minimum balance. There’s also a choice for entering the custom amount. You will likely select this option if you’d like to pay more than your minimum due but still less than that full balance. It can also happen if you make multiple payments on your credit card per month (feel free to read that article) and get confused about which bill you did pay and which ones are still outstanding.
So, if you enter that customizable amount incorrectly, perhaps by swapping a digit or adding an extra one, you can, in fact, pay a lot more than what you owe on your credit card bill. As a preventative measure, many card companies set a limit so that you can’t pay more than the full balance for this reason, but not all of them do. Some of them will allow an overpayment. You can also do this with a physical check if you write the wrong amount.
It’s so important to check and double-check before you either click the ‘submit’ button or you enclose that physical check with your payment so you can avoid overpaying.
– Additional payments you make on top of your automatic payments
You might accidentally pay more on your credit card than you intended when you make one or multiple manual payments, while automatic payments are set in place. For just about every card under the sun, you’ll have the possibility to set up auto-pay to pay your monthly bills. I love this feature because you don’t have to stress every month when due dates come up for all your bills and you’ll never be late and get that late fee or a report to the credit bureaus when you have this in place. The credit card company will simply automatically draw money from your checking account at the selected time.
The problem you can encounter here is that if you decide to manually pay your balance before your statement and auto-pay is selected, that means you may wind up making an excess payment. For example, if you have auto-pay selected to happen on the 5th and you manually pay the bill on the 4th, the billing system might not catch this change in balance and will also draw the old balance from your bank account.
It’s better to overpay than be late though. When I had a new card a few years ago, I’d set up auto-pay and was told that it would take 2 months of manual payments first before that went into place. I paid those 2 months manually and then for the 3rd month, I noticed that it was the 5th and my payment hadn’t been drawn. I called them up and they assured me it would come out at midnight. When it didn’t, I had to call back, but they rectified it immediately and didn’t charge me a late fee or report it to the credit bureau. It was clearly their error, but one you definitely don’t want the hassle of dealing with.
– Receiving a refunds or credits
Yet another possible reason for the overpayment on your credit card is a refund you received. Let’s say you go out and buy a new coffeemaker on the 18th of the month. You make your coffee and all is glorious. When your credit card statement comes in at the end of the month, you make the payment. But soon after your payment is made, your brand new coffeemaker dies. You take it back to where you bought it from and ask to get a refund. Since you paid with your credit card, the store refunds the amount onto your credit card.
When something like this happens, it can result in an overpaid credit card despite you having paid it right on time. This can happen in other ways too, like if you have a travel rewards card, it might provide credits on your statement toward airline fees. Certain credit card fees may also be refunded, like late fees, interest charges, or annual fees, when applicable. But most commonly, it happens when you return something to a store and this return is processed by the card company after that particular billing period ended.
There are instances where cashback reward cards will automatically apply that cashback on as a credit on your statement too. Others will require you to redeem that cashback for those credits. Regardless, if you have rewards that exceed the balance during a particular period, you may find your statement on your credit card appears as a negative number.
Keep reading and I’ll tell you what you can do about that!
How to get your credit card balance back to $0
So, what happens now that you’ve accidentally overpaid your credit card bill?
There are a few options you can partake in that will correct things. Namely:
- Keep using the credit card
- Don’t do anything
- Get a refund
I’ll explain each of these so follow me!
– Keep using the credit card
In matters when you overpay on your credit card, you’re pre-paying any future expenses. If the sum of money in overages isn’t too outlandish, you might just shrug it off and keep using the card to balance it out. Any purchases you make with that credit card are applied toward the negative balance and then when that balance is back to you owing money again, you just make your usual payments.
This is basically what my friend did when his wife accidentally overpaid on his card. He just used the negative balance until it balanced out, and then ordered her not to help him anymore.
This is the easiest option for you too if you use your card on the regular and that overpayment balance is small. So, if you typically put gas and groceries on your card, just keep doing that and it will all work out. When there’s no written request, the rules give the lenders a lot of wiggle room in how they return your money back to you. And honestly, if you were going to spend it anyway, you may as well enjoy a period of no monthly payments while you’ve got the credit going on here.
But let’s look at what else you can do.
– Don’t do anything
I really don’t advise this one at all, but it is still an option. You could simply stay put and do nothing about that negative balance. By law, credit card companies must make a gesture of good faith to get you a refund of the negative balance after six months have passed without you using the card. Why don’t I recommend this route? Simple. Because it takes 6 months to receive that refund and you can’t even be certain you’ll get that money back. It’s not that the credit card company won’t try, but what if you move or something else inhibits their ability to contact you? Chances are, you won’t see that refund.
Because all card issuers are a bit different, they have different methods in place. For example, Wells Fargo customers can ask for a refund, but if they don’t, it will automatically put in a refund after 90 days if there has been no activity on the card. For Chase, you can get that balance refunded if it’s under $1 but you need to make the action for that. In other words, you’ve got to contact them to get your change back.
– Ask for a refund
Oops! You sent that extra money to your card issuer. Even still, that money is yours. It’s not a common occurrence but it does happen. The good news is that most credit card companies are fine with refunding you any overpaid amount by writing you a check. You just have to give them a phone call or email them and ask for a check that covers that overage.
So, if your full balance due was $150 and you accidentally input $1,500, you’d definitely want to get that back. If it was a smaller amount, I’d say leave it and it will sort itself out as you spend on the card. It’s really easy to get that refund so go for it.
Following below are more specific steps for getting your refund when you overpay on your credit card so read on!
How to get a refund after overpaying your credit card
For the most part, it’s fairly the same to get a refund after overpaying your credit card, though each credit card company has slight variations. The key steps are the same so I’ll walk you through it. It’s basically like this though:
- Contact the credit card company
- Request a refund
- Make sure your contact information is up to date
- Use a tracking number
- Collect the refund
Now for more details…
While calling them can also get you your refund (depending on the card, which I’ll talk about shortly), for most cards, you’ll have to write a letter to the credit card company where you cite the overpayment. You need to be very detailed with this letter so there are no delays in receiving your refund. Include the payment information and the date. You should also request that you would like refund mailed.
I highly advise that you drop this important letter yourself at the post office and get a tracking number on it. Return receipt is great because you will know they received it. Once they have it, the credit card company must issue your refund in 7 business days, though be aware that it may take a few more days for that payment once they cut the check to get to your mailbox.
According to the Office of the Comptroller of Currency, you can get that refund in a check, money order, cash, or directly deposited in your bank account. This applies to any line of credit or home equity too when you make an overpayment. I recommend you put this all in writing and track it because should any problems arise, you have hard evidence of your request to back you up.
If you don’t make a written request, the creditor must make what they call a ‘good-faith effort’ to return your money to you after 6 months. They will do so through the address and number you have listed, but if you haven’t updated those things, you may well lose that refund. They aren’t required to track you down if they can’t find you at the last known address you’ve held or your phone number.
Even if you never make an overpayment, you should always understand the terms of the contract you have with each of your creditors. There should be something in there about how they handle overpayments for when the account is open and even if you close that account.
But not every credit card company will require a written request for a refund. Some will allow you to call and ask. What do I recommend? If you can’t find it on their website or in your contract, give them a call and ask whether you need to put it in writing. If they do require a written request, make sure you confirm that they have your proper contact information and make sure that you get the correct address from them as to where you need to send it. It’s usually not the same address as where you send your payments. After you confirm this, get your letter out there and get ready for your refund!
What lenders are required to do when you have a negative balance on your credit card
Are lenders required to do something when your balance is negative on your credit card? It really all depends on how YOU go forward. Remember the Federal Reserve Board has that Regulation Z where lenders must credit your overpayment to your account, refund that overpayment balance within 7 days of being contacted, and attempt to reach out if you haven’t contacted them.
So basically:
- Credit your account
- Issue your refund upon written request
- Make a good-faith effort after 6 months
The first step is that the lender has to credit your overpayment. This usually happens without you doing anything other than that overpayment you made in the first place. After that though, you’ve got 2 ways of going about things. You can just go ahead and spend on that card as you would until you’ve used up the credit (ideal if the credit isn’t a large sum) or you can put in a written request for a refund of that amount. Once the bank gets that written request, Regulation Z mandates that they must refund that overpayment within 7 business days of receiving that request from you.
If you do nothing at all and don’t spend on that card, the lender by law has to reach out in good faith to find you to refund that money. Why wait though? It’s your money! Again, I sincerely advise that you don’t let money that is yours sit with someone else. You get nothing for it. It’s not like you’re earning interest on that money. Go on and get that refund. You could put it to much better use.
There is something really important to know here though. For most of these instances, it’s a very simple and easy process. But employees at the credit card companies are specially trained to keep an eye on large overpayments. The reason?
Interestingly, a large overpayment might raise the red flags for the credit card company. Money launderers will use this method of overpayments to launder money. If you do it once, they might raise their eyebrows so keep an eye on how much you’re inputting when you pay and you’ll be fine. If this continues to happen though, they may lock down your card and have the government investigate on grounds for fraud. Of course, accidents do happen so if you did accidentally overpay and you did get flagged for potential fraud but come up clean, you will still have to claim that refund or wait 6 months without using the card.
Overpaying on your card isn’t a bad thing (unless they think you’re a money launderer of course) but it’s not a good thing either. Here’s why I recommend you pay more attention when filling in those numbers online and in your checkbook.
Why you should avoid overpaying your credit card
There are a few reasons why you shouldn’t overpay on your credit card and bring your balance to a negative.
- You’re earning the card issuer interest
- You can mess up your ability to pay your other bills
- -It can trigger an alert for fraud
Let’s talk!
Why would you want to earn interest for someone else? You’re letting a card company hold your money, so every dollar you paid over is tied up with them earning them interest instead of you. You’re better off earning your own interest on your checking and savings accounts.
And speaking of tied up, when you overpay your credit card bill by accident, if you need that money, you have no choice but to use that card to make your other bill payments instead of being free to pay on your auto-pay you set up. So, let’s say you accidentally overpaid by $1,350 like in the example I’ve been using throughout this whole thing. That could create a shortage for you in your bank account which means your auto-pay for your phone or your electricity can’t go through because you don’t have the funds for it. Ouch!
On top of all that, there’s the fraud thing. It’s not very common to overpay on a credit card. If you do it once, it’s usually not a big deal. Especially in the case of my friend where it was easy to see how the error was made. Also, his wife sent in the old payment slip with it and they realized it was a mistake.
There are instances where you can call up the credit card company and prepay on your card if you’ve got a large purchase coming up that will exceed your credit limit. In this case, you’d be notifying them though and they wouldn’t sound the alarms. But without a call and suddenly you make a very large overpayment, especially if it is a new card, that will get the alarm bells dinging. They’ll suspect someone has accessed your account without permission and could shut down your account temporarily while they investigate. They may even close your account for good.
So, what should you do if you accidentally typed in the wrong amount, which is well over what you owed and you get flagged for fraud? Breathe, and keep reading!
How to Handle Your Credit Card Being Flagged for Potential Fraud
You overpaid on your card and now you can’t use it because they flagged you for possible fraud and locked it down. Instead of freaking out, pick up the phone and get on the line with customer support. Stay calm and explain what happened, how you accidentally made a mistake when filling in the payment. They will ask you questions to ensure it is legitimately you, so be prepared with your security questions and any other information that would prove your identity. Remember, it’s their job to protect you from fraud too, and you’d want them to grill someone pretending to be you, so be patient.
Once you’ve confirmed what they need to know, they should be able to reactivate your account. Even if they shut your account down completely, you should still call. They may reopen the account, but if not, look for new cards instead. Overpaying on your card shouldn’t impact your credit plus you may be able to earn special sign-up bonuses.
Overpaying a credit card won’t improve your credit score
If you think overpaying your credit card will boost your credit score, that’s not how it works at all. Please do not do this for the points I’ve mentioned above, particularly about fraud. If you want a larger limit, you should call and speak to customer service. Never take a card with a $1,000 limit and overpay so that you have -$5,000 credit on there.
Your credit card agreement will likely mention something about overpayment and will most certainly tell you that you cannot increase your credit limit by the overpayment amount. Some credit card companies won’t accept any payment that creates a credit balance. Again, this is all done to prevent fraud and keep you safe. If you do overpay in error, you can get that money back but don’t make a habit of doing it.
There is no way to obtain a credit balance by putting in a cash advance or using your card in this way. You won’t earn any interest either on this credit balance.
So, if you’re reading this and you accidentally overpaid, now you know what to do. You’re owed a refund if you’d like to accept it. If you need that money for other bills, I advise that you contact your credit card company immediately to get that money back to you. If it’s a small amount, you can leave it and spend it on your next purchases for gas or groceries.
But what if you do all the right things and send a certified letter requesting a refund and the credit card company won’t issue your refund? While it’s rare to be refused when there is valid proof of the overage, you can contact the Consumer Financial Protection Bureau and file a complaint.
Remember, this excess payment you made doesn’t give you a higher spending limit or more money to burn. The best way to handle it is to get the refund on large amounts or use it responsibly if you leave it on the card.
Conclusion
A negative balance on your card means you’ve overpaid in some way. Perhaps you’ve accidentally submitted a higher amount than required by your payment or you’ve returned something to a store at a certain time during the billing cycle that resulted in this negative balance, or credit, for you.
Regardless, if you do wind up with one, you should seek to get your money refunded to you. There are laws covering you for this so call your credit card company and find out how to start the process for requesting a refund in writing. Keep records of everyone you speak to and send your written request certified in the event that you need to show proof you requested your refund.
You can also leave that amount of overpayment alone in your account and spend it on the next few things you’d have used your card for. If it’s a small amount and you’re going to be using your card for a purchase you already planned on, this will work out fine. You can also do nothing and wait for the creditor to reach out, but it’s your money so you need to make it work for you, not for someone else.
Don’t make a habit of overpaying. It’s not good for your checking account when you’ve got other bills due, it doesn’t give you a bigger credit line, and it doesn’t boost your credit score. What it can do is flag you for fraud and cause major headaches down the road so pay attention when you’re making payments to avoid it.