What Happens if You Overpay Your Credit Card?

Paying the right amount on a credit card each month can be more challenging than you might expect. That’s because credits or returns can change the balance. So what happens if you overpay your credit card? Don’t worry, it’s still your money and you’ll get it back in one of two forms. Here’s your guide to credit card overpayment.

How Credit Card Overpayments Happen

While it’s annoying to discover you’ve overpaid a credit card, it isn’t unheard of. Customers overpay credit cards for a variety of reasons. 

Refunds or Returns

When you return an item or get a refund for an overcharge or mischarge on your account, it shows up as a credit. But that credit can take several days to process. If your balance is due in the meantime, you could find yourself overpaying.

One way to avoid that is to save your return receipts in the week leading up to your credit card payment coming due. Then you can check to see whether those returns have been posted. If not, you can subtract them from your total payment amount. Just be sure that you’re still paying the minimum required payment to avoid interest and fees on your account.

Overpayments

If you regularly pay your credit card balance, you might have an overpayment already on your account. In that case, the credit card issuer will deduct it from what you owe as a credit. For example, users who owed $2,000 and had a $100 credit balance on their account for a previous overpayment now owe $1,900. While it should be reflected in your balance, users can also look at the wrong number and mistakenly overpay.

Disputes or Chargebacks

When you dispute a charge on your account, it can take many days to resolve. You might forget entirely about the situation and keep using your card and pay it like normal. 

If the dispute gets resolved in your favor around the time your payment is due, you might find yourself in a credit card overpayment situation. When disputes rule in your favor, the expense becomes a chargeback to the merchant, meaning the merchant must cover the expense.

Cashback or Rewards

Another source of confusion on your account balance can come from a nice perk: cashback or rewards. These can post while your payments are pending, leaving you with a negative balance, which looks like an overpayment. The good news is, you’ll still get the benefit from these rewards as they’ll come out of what you owe next month on your credit card bill.

Fees or Interest Adjustments

Fees and adjustments from your credit card company can also alter your credit balance and can also be a source of overpayments. When your financial institution issues a credit for a fee or adjusts your interest on your account, you might mistakenly make an overpayment in the meantime.

What to Do if You Overpay Your Credit Card

Account holders experiencing a credit card payment that exceeded their balance might be wondering what to do next. Here’s a look at how to handle the situation.

Ask for a Refund

You can request a refund from your credit card company. This might be in the form of a direct deposit back into the account you paid your account balance from. This also might take several business days, in which case it might be better to allow the credit card company to leave the credit on your account and use it on a future month’s balance.

Spend Down the Negative Balance

In many cases, the best thing to do is just use your credit card like normal. Then, you’ll use the negative balance or credit on your account, making your next payment smaller. Just pay close attention to the ending balance for the month to avoid another overpayment.

What Is the Impact of a Negative Balance on Your Credit Score?

You should not worry about your credit score when working through an overpayment on your account. Having a negative balance will not impact your credit. You still want to avoid negative balances because when there’s too much credit on your account, your credit card issuer might flag your account for fraud. This can lead to a lengthy dispute or inability to use your card for many days while the company sorts things out.

Can Your Credit Limit Be Higher if You Have a Negative Balance?

Credit limits will be the same regardless of whether there is a negative balance on your account. If your credit limit was $5,000 and you have a credit of $200 on your account, you can spend up to $5,200 in the upcoming month, but that’s a one-time experience. After that, you’ll still only be able to spend $5,000 per month on your credit card.

What Is the Possible Downside of Credit Card Overpayment?

Large overpayments can trigger fraud alerts. This is a frequent occurrence for people who are laundering money, which is why financial institutions look out for these signs that something isn’t right. Small overpayments from time to time likely won’t trigger a fraud alert. Just be sure you aren’t doing them too regularly or in excessive amounts.

How to Avoid a Credit Card Overpayment

Once you’ve experienced a credit card overpayment, you’ll likely look for ways to avoid it in the future because it can impact cash flow. Here are some tactics.

Set Up Balance Alerts 

Track your balance with account alerts. You’ll get notices when new charges hit your account or when refunds come through. That way, you’ll know how much of your credit you’re using at any point and can manage your balance with ease.

Review Your Billing Statement

Each month, take some time to review your credit card statement. Flag expenses you don’t recognize and watch for refunds and disputes to be resolved. That way, you know if something didn’t post correctly and you can review it with the merchant before paying your credit card. This will also help you avoid overpayments.

Double-Check Payment Amounts 

Most credit card apps are simple to navigate and make it clear what you owe and how much to pay each month. The apps also present a few other numbers, including minimum payment, statement balance and account balance. When making a monthly payment, pay the current account balance as it stands on the day you make the payment.

Automate Payments with Caution

Autopay is a handy tool to avoid unnecessary fees and penalties. But with it comes some risks for overpayment or surprises. When payments are automated, you might miss fraudulent charges or not realize that a refund has come through properly. Even when automated payments are enabled, you should check your account at least monthly to review charges.

Regularly Review Your Credit Card Activity 

Reviewing your credit card activity at regular intervals ensures you flag unusual transactions or billing errors. That way you can resolve them with the merchant long before your account statement comes due, which helps you avoid overpayments. Report discrepancies to your financial provider immediately.

Avoid Overpayments to Prevent the Headaches of Possible Account Fraud

Ultimately, a small credit card overpayment from time to time won’t have an impact on your financial standing, and you’ll see the money back on your next account statement. You won’t experience impacts on your credit score or credit limit, and your financial institution won’t penalize you so long as you aren’t receiving an overpayment notice every month, in which case your account could get flagged for fraud.

Frequently Asked Questions