Can You Overpay a Credit Card? (2024)

More than 36% of Americans pay theircredit cardsin full every month, according to the American Banking Association.¹Sometimes, they may find themselves overpaying those balances, by design or by mistake. But what happens if you overpay your credit card balance?

Not much, really. The amount overpaid will show up as a credit in your account and your balance will appear as a negative dollar figure. That amount will be applied to the charges in the next statement and effectively reduce that balance due.

A negative balance on your credit card account essentially means that the credit card company owes you money. It can happen for a variety of reasons, such as:

• If a card member makes a mistake when paying the bill. For example, paying $250 on a $205 balance.
• If a merchant issues a refund that is larger than your total statement balance, such as for big-ticket purchases like appliances and airline tickets.
• If the credit card company reverses a fraudulent charge that was greater than the total statement balance.
• If a cash back statement credit is applied after the user has already paid their balance in full.

If you overpay a credit card, you’ll end up with a negative balance, the amount of which reflects how much you overpaid. It may sound like a good thing to prepay credit card debt, especially if you are trying tobuild your credit score, but in reality, a negative balance doesn’t really benefit the card member.

What’s important about negativecredit card balancesis asking not what they may do, but what they don’t do:

• Does overpaying increase your credit score?Not really. Your credit score is influenced strongly by your credit utilization ratio – how much of your credit limit you use regularly. However, anything lower than a $0 balance still merely counts as $0 when calculating yourcredit utilization ratio, so a negative balance is not counted as positive credit.²
• Will you earn interest on a credit card overpayment?Again, no. While you may have to pay interest or other finance charges on unpaid credit card balances, you won’t earn interest on a negative balance. An overpayment is merely counted as a credit to your account and will be used to reduce any future balances. If you’re trying to improve your financial picture, you’d be better off putting that money into savings.
• Does overpaying raise your credit limit?An overpayment will not help boost your credit limit, not even temporarily. Your credit limit remains the same – you’ll just have a negative balance that will be applied toward your next statement. Details like credit score and income are usually factored into a credit limit increase.

Not only does it not make sense to overpay your credit card, but it may hurt your credit picture, warns personal finance expert Margaret Price. Overpaying your card by a significant amount could trigger a fraud alert, says Price, co-author ofSingle Women and Money: How to Live Well on Your Income.

For example, money launderers sometimes use excess credit card payments to move money and make it appear legitimate. Thieves might use negative balances to cash out on “return fraud,” getting refunds from retailers on stolen items or fake receipts. Credit card companies are on the lookout for these and other kinds of fraud when processing a credit balance refund.

Paying credit card billsonline, whether on the company’s website or mobile app, can help prevent overpayment on your card, since the balance shown online should include any last-minute refunds or credits, which makes it more up to date than the balance on your paper statement. The payment window online usually includes a “statement balance” option you can click on, so you don’t risk going over if you wish to pay in full. Setting up email and text alerts can also help remind you about when the bill is due and the amount you owe.

If you have enough cash flow to pay your bill in full, or if you budget a set amount monthly to pay off credit cards, setting up automatic payments can prevent the minor errors that can turn into negative credit balances. Autopay also serves as a backstop to avoid late charges and missed payments. You can always adjust the payment before the due date, depending on your circ*mstances, to any amount between the minimum and the balance due. If your balance ends up being less than your fixed autopayment amount, some credit card issuers will simply debit the amount due instead of the fixed amount, automatically circumventing accidental overpayment.