Even after enabling automatic payments, you could end up overpaying. For instance, if you decide to pay off your balance manually before your scheduled automatic payment or your payment posts before you receive a refund from a merchant.
Overpayment happens, but there’s no need to panic about it. Paying more than what’s due on your credit card bills won’t negatively affect your account, and you won’t lose the money.
Here are a few things that may happen if you overpay and what you can do to get your money returned.
How You End Up Overpaying Your Credit Card
Overpaying a credit card typically occurs due to one of the following reasons:
Receiving a Refund
When you receive a refund for a purchase you paid with your credit card, the refunded amount goes back on the card. That can lead to an overpayment if you’ve already paid off the purchase.
For example, you make a $100 purchase on the 5th of the month and pay off your credit card bill on the 15th. The purchase doesn’t work out, so you get a refund on the 20th.
That $100 payment would go back on your card and lead to a credit balance.
Making Duplicate Manual Payments
It’s possible to send in duplicate manual payments on your credit card. If you’re wondering how anyone could make this mistake, the reason is the lag time between when you send a payment and when it processes.
Credit card payments can take a few days to process. During that processing time, your online account may not reflect the payment. If you send in a payment on the 1st and check your account again on the 2nd, the balance could look the same.
For those of us who are forgetful at times, it’s easy to mistakenly send in a duplicate payment this way. One way to avoid this is to set up automatic payments, which are also a good way to ensure you don’t miss a credit card payment.
Another is to check your most recent payment confirmation emails before making any new manual payments.
Making Both an Automatic and a Manual Payment
Automatic payments typically won’t go through if you’ve already paid your credit card bill. But once again, that lag time during payment processing could lead to an overpayment.
If you make a manual payment a few days before an automatic payment is scheduled, the manual payment may not process in time to stop the automatic payment.
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Providing an Incorrect Payment Amount
A mistake on a payment amount can happen whether you pay your bill online or by check.
When you pay a credit card bill online, you have the option to enter a custom payment amount. If you go that route and enter more than your card’s balance, either by mistake or because you don’t completely understand your credit card statement, then you’ll overpay your bill.
The same is true if you pay by check and you write the incorrect amount.
What Happens if You Overpay Your Credit Card
If you overpay your credit card your account’s balance will go negative. That means that the card company owes you money, rather than you owing the card company money.
Avoid it if Possible
Overpaying your credit card isn’t the worst thing to do, but it’s still not a good thing to do.
For one, you don’t want the credit card company holding your money. Every dollar that is sitting in the credit card company’s account instead of yours is earning the company interest instead of you.
Plus, the money is tied up and relatively inaccessible to you.
If you need cash to pay bills and you have a lot of money tied up in overpaid credit card balances, you might wind up in financial trouble even if you would have been able to pay the bills.
How to Handle an Overpaid Credit Card
If you do accidentally overpay your credit card bill, there are a few options to fix the situation.
When you overpay you credit card, you’re essentially pre-paying for your future expenses. The easiest thing to do is to just continue using the credit card. All of your future purchases will be applied towards the negative balance you’ve built up.
Once you’ve gotten your balance back to the point where you owe money again, you can continue making payments as usual.
Ask for a Check
Even though you sent the money to the card issuer, the money is still technically yours. While overpaying a card isn’t common, it also isn’t as uncommon as you would think.
Most credit card companies will be happy to refund you the overpaid amount by sending you a check.
All you have to do is contact the company by phone or e-mail and request a check for the balance.
While this is the slowest and least-recommended option, you can do nothing about your negative credit card balance. Legally, credit card companies must make a good-faith effort to issue a refund of the negative balance after 6 months of the card being unused.
The reason that this is not recommended, other than the fact that it takes six months to get the refund, is that there’s no guarantee you’ll get the money back.
The card company will try to refund you, but if you’ve moved or something prevents them from contacting you, you won’t get the refund.
Does Overpaying Your Credit Card Impact Your Credit Score?
Overpaying your credit card doesn’t impact your credit score. For credit scoring purposes, there’s no difference whether the card has a balance of $0 or an overpayment credit.
A potential misconception is that overpaying your credit card can improve your credit utilization. Your credit utilization is the percentage of your available credit that you use, and a lower percentage is better for your credit score.
For that reason, one may assume that an overpaid credit card balance could boost your score.
That’s not how it works, though. Credit card companies can’t report that a card has a negative balance. Instead, they must report it as a balance of $0. There’s no way to boost your credit score by overpaying your credit card bill.
It is possible to overpay your credit card, but it generally isn’t something you should do on purpose. You’ll end up with a spending credit you can either use or get as a refund.
While you won’t have any problems because of an overpaid credit card, keep in mind that there’s also no good reason to leave your card that way. It doesn’t help your credit score, and there are no advantages for you.
If you have any doubt that you’ll use the credit balance within a month, you should go ahead and get your money refunded.
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