What Happens If I Overpay My Credit Card?

Overpaying your credit card creates a negative balance on your account, which means the credit card company owes you money. This isn't harmful to your account, and you can either use that credit for future purchases or request a refund.

While minor overpayments aren't a problem, large overpayments might trigger fraud alerts from your card issuer.

What happens when you overpay your credit card bill

Mistakes happen. Maybe you hit the wrong key when paying online, forgot about a pending refund, or made a manual payment before your automatic payment went through.

Whatever the reason, here's what you need to know about credit card overpayments.

Your overpayment might trigger fraud concerns

Small overpayments usually just create a negative balance with no issues. But a large overpayment might raise red flags for your credit card company.

Why? Because significant overpayments can sometimes signal refund fraud or money laundering attempts. Your issuer might freeze your account while they investigate or even close it completely, which could hurt your credit score.

If this happens, call your issuer right away to explain the mistake. Once they verify you're the cardholder and understand what happened, they'll typically restore your account.

Don't expect credit score benefits

Overpaying won't boost your credit score any more than a regular full payment would. Your credit utilization ratio will decrease, which is good for your score, but not more than if you'd paid exactly what you owed.

Your overpayment also won't increase your credit limit. If you need a higher limit, you'll need to request one formally.

Past late payments still count

Overpaying now won't erase any previous late or missed payments. Those stay in your credit history regardless.

No interest earned on negative balances

You won't earn interest on your overpayment. Interest only applies to money you owe, not money the card issuer owes you. Your negative balance is simply a credit that applies to future purchases.

What to do after overpaying your credit card

You have two main options after overpaying:

1. Use the credit for future purchases

The simplest approach is to let your negative balance apply to your next bill. If you overpaid by $100 and spend $200 next month, you'll only owe $100.

If you don't use your negative balance within six months, the credit card company must try to refund you. Make sure your contact information is up-to-date so they can reach you.

2. Ask for a refund

If you want your money back sooner, you can request a refund. Most issuers let you do this by phone or through your online account, though some may require a written request.

The issuer must respond within seven business days. Your refund might come as a cheque, direct deposit, or another payment method. If you don't receive it when expected, follow up with your issuer.

How to avoid accidental overpayments

To prevent overpaying your credit card:

• Check your current balance before making payments

• Be aware of pending refunds that could affect your balance

• If you use automatic payments, remember to cancel manual payments

• Review statements carefully before paying

• Set up balance alerts through your card issuer's app

Do not stress about overpayments

Overpaying your credit card isn't a disaster. Your money isn't lost, and you have options for using the credit or getting a refund. Still, it's worth being careful with payments to avoid the hassle and potential temporary cash flow issues.

Check balances before paying and keep track of any refunds coming your way. A little attention to detail can prevent payment mistakes and keep your finances running smoothly.