What is a Negative Balance on Credit Cards in UAE?

What Does a Negative Balance on Credit Card Really Mean?

To put it simply, a negative or a minus balance credit card is when the bank owes you money on your card. This happens when you pay more than the outstanding amount. 

The most important point here is that despite owing you money, the bank is not required to pay out the negative balance at the end of the billing cycle. Such balances, rather, act as discounts on future card transactions. If you want to withdraw the amount of the negative balance, you need to directly connect with your bank.

Why Does a Negative Balance on Credit Cards Occur?

A minus balance credit card occurs only in select cases. Let’s take a look at the most common ones below —

• Overpaid Bill: This is often the most common scenario. As the name suggests, this is what happens when you pay more than the outstanding balance.
  For instance, let’s say that your card bill or the outstanding amount is AED 500. By mistake, however, you pay AED 600. In this case, you will have a credit card minus balance of AED 100. This means for any next transaction you perform using your credit card —
  • The AED 100 will be used as a discount
  • Your credit limit will start being used only when the overpaid amount is spent
• Cashback/Refund/Reversal: If your card bill is paid but you receive —
  • A cashback on your card 
  • Get a refund for an item you purchased with the card
  • Or any bank fee charged to you is reversed

It may appear as a negative balance on your credit card. This, however, is only possible when your bill is either paid or the refund, reversal, or cashback is higher than your outstanding amount.

Impact of Credit Card Minus Balance on Credit Score and Credit Limit in UAE

It’s important to remember that a negative balance is not a bad thing. It can happen mistakenly from your end if you overpay your bill or if you receive cashback or refund that’s more than the outstanding amount. 

When you have a negative balance on credit cards, your credit limit is further extended. For example, if you have a credit limit of AED 10,000 and you have a negative credit balance of AED 300, your credit limit becomes AED 10,300. This is the case till you spend the negative credit balance.

Coming to credit Score, there is usually no negative impact of a negative balance on your score. Since you’ve paid your outstanding balance + additional amount, it doesn’t show you as irresponsible with debts. 

Important

If your available credit limit is negative, it can negatively impact your credit rating. This, however, is different from a negative balance. When a negative limit happens, it means you have overspent on your card. In this case, you may now be subject to overspending fees. Your credit score can also fall due to overutilisation of your credit limit, which should ideally be less than 30%.

How Does a Negative Balance on Credit Cards Affect Your Spending in UAE?

Negative balances positively affect your spending power, meaning you’re able to spend more. A negative balance of AED 500 on an AED 10,000 credit limit, for instance, means your effective credit limit becomes AED 10,300. 

Moreover, even if you don’t spend beyond the AED 500 negative balance in a month, you’ll still be entitled to cashbacks and rewards for your spends without owing any money to the bank.

How to Resolve a Negative or Minus Balance on Credit Cards in UAE?

You can resolve a negative card balance by simply using your credit card to make transactions. If your goal is to resolve your negative balance, you must spend more with your card than the negative balance amount. 

Going back to the previous example, if you have a negative balance of AED 500, just make transactions of AED 500 or more in the next billing cycle to remove the balance.

Negative Balance vs. Negative Credit Limit: Key Differences

While a negative balance is a good thing for you, you can face negative consequences if your available credit is negative. The following table details the key differences between a negative card balance and a negative credit limit.

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