Need some extra breathing room on your credit card but can’t get your credit limit increased?

One way to get more spending power is by overpaying your account and creating a negative balance on your credit card. You’ll be able to artificially increase the amount you can spend on your card.

Here’s how it can be done and how it works.

What is a negative balance on your credit card?

So what is a negative credit card balance?

Basically, you’re in a situation where you’ve paid more on your credit card than what you owe. If this happens, you’ll see your card balance expressed as a negative number.

Here’s an example of what it could look like. This has a few returns on the account, and now the bank owes me, instead of the other way around.

Negative balance on a credit card
My current balance is negative thanks to those AIR CAN refunds on May 5th. Note that the negative number is expressed with brackets instead of a negative sign – this is one of the common ways it’s indicated on your account.

And my available credit remains at $5,000, even with the new purchases that have been made.

Since the total amount of new transactions is less than the total refunded, my credit limit remains untouched, and I still have a negative balance to eat into.

6 ways to get a negative balance on your credit card

So how can you go about getting a negative balance on your credit card?

Here are 6 ways that it can happen. Just keep in mind that only the first method is guaranteed to get you a negative balance.

For the other 5 ways, 1 or 2 of these things will have to come together to see a negative balance:

  • you recently paid your credit card statement in full,
  • there are few recent purchases on your account, or
  • there’s a large credit from a refunded transaction.

The example above combines all 3 of these.

Overpaying your credit card statement

Paying more than what you owe is the easiest way this can happen, and the one that’s largely within your control.

When you go to pay your credit card bill, simply pay more than what you owe in total (not what your monthly statement says, but everything you’ve purchased).

Also be sure to add up any pending purchases in your total, as they’ll take away from your negative balance when they get posted.

So, say:

  • your previous bill was $500,
  • you have $200 in new purchases, and
  • another $100 pending purchases.

If you want to create a negative balance of $500, you’ll need to make a payment of $1,300:

Previous bill + new purchases + pending transactions + desired negative balance = total payment

$500 + $200 + $100 + $500 = $1,300

Corrected transaction

Did a charge not show correctly and later get adjusted?

You could see a negative balance, assuming there has been little activity on your account.

Reversed fraudulent charge

For fraudulent charges on your account, the reversal counts as an account credit.

Cancelled credit card fees

Did you get any credit card fees reversed? These will appear as credits on your account.

Purchase refund

When you return purchases you’ve made, these always show up as a credit on your account.

But if you made the purchase and return within the same statement cycle, you won’t see a negative balance, as it will simply offset the original purchase.

Related: How Foreign Currency Exchange Works When Returning Your Purchases

Rewards issued as a statement credit

This applies to cash back credit cards that pay out cash back rewards once per year. Cash back rewards applied as statement credits show up as a credit in the account.

If the reward amount is larger than what’s owed on the account, a negative balance will occur.

How you can get your negative balance back

Was your negative balance created by one of the last 5 items listed? You may wonder how you can get your money back.

The easiest way is to keep making new purchases on your card. Each one will eat into that negative balance. Simply put, your next credit card bill will be much smaller.

The other way you can get it back is to call your credit card issuer and ask for a refund. They’ll generally send the money back by cheque, but it can also be deposited into a linked bank account if one is set up.

Just note – they won’t pay any interest on the balance owed.

Why you may want to overpay your credit card bill

For 5 of those 6 reasons, they’re generally either outside of your control, or simply getting back what you paid. Making some purchases generally won’t be an issue.

However, the first one is something you can control.

Why might you want to get a negative balance on your account? Here are a couple of reasons.

Increase your card’s purchasing power

Have a lot of purchases coming up? Going to be travelling and need extra breathing room?

If you have a lower credit limit, you can use this strategy to increase the amount you charge on your card.

As seen in the above real-life example, as I started posting transactions on the account, my available credit hasn’t been touched – I’m just using the negative balance.

Keep over-limit fees in mind

Your credit card may be allowed to exceed your credit limit, thanks to over-limit fees. If these are set up, you can go over your credit limit for a fee. But if these aren’t set up and you make a purchase that exceeds your limit – the purchase will be declined.

Most cards are already set up to add over-limit fees unless you’ve already asked your issuer not to be able to exceed your limit.

With that said, it never hurts to call your issuer and give them a heads up if you’re planning on making a large purchase. This way they’re notified and they can tell you if it may get declined.

However, there’s a cost associated with over-limit fees – mose issuers charge $29 when you exceed your credit limit.

If you have a negative balance, you’ll be able to pay for large purchases without incurring any over-limit fees, since you won’t actually be exceeding your total credit limit.

For Quebec residents only: Over-limit fees are not charged if you’re a resident of Quebec.

Cash advances

If you’re going to need a cash advance, especially if you’re travelling outside the country, having a negative balance will help avoid those high-interest rates you’ll see (and remember, interest on cash advances start accruing immediately).

Any cash you pull will simply be from your negative balance, and you’ll be able to avoid interest charges.

A few things to consider before creating negative credit card balances

Before going out and creating a negative balance on your credit card, here a couple of things to consider doing.

Ask to increase your credit limit

This one is obvious, but simply asking for a credit limit increase can make this simpler. That way, you won’t have to worry about making larger purchases or whether you’ll use up all of your balance.

There are no guarantees that this will work, obviously, since your credit card issuer can decline the request.

But, there’s no harm in trying (the worst they can do is say no), and many issuers even allow cardholders to make the request online.

The impact on your credit score

If you only plan to do this once in a blue moon, you’ll be fine.

But if you’re frequently maxing out your credit cards, this may affect your credit score.

Credit utilization is one part of your score, so the more of your available credit you use, the more it looks like you could be in financial distress to potential lenders (including your current credit card issuers).

Related: Credit Score In Canada: What These 3 Digits Say About You

Get a prepaid credit card

If your credit score is making it hard for you to get a larger credit limit, consider getting a prepaid card as a supplement to your credit card.

You’ll be able to load your own cash onto the card, and then make all the purchases you want with your own money.

A great example is the . You can preload the card with up to $20,000, and then you won’t have to worry about large purchases or running out of credit. If your card’s balance starts to run low, you can simply add more to it. As a bonus, this card also offers 0.5% cash back on all purchases.

Related: KOHO Prepaid Visa Review: Regular Vs. Premium – Everything You Need To Know

How it works for major issuers

For most issuers, it works largely the same. However, a few of them offer cards that don’t have any overlimit fees.

Here’s an overview of the major credit card issuers in Canada.

Credit Card Issuer Allows negative balance on your credit card? Does overpaying allow you to go over your credit limit on individual purchases? Typical over-limit fee
Amex Yes Yes, not applicable on charge cards $29
BMO Yes Yes $29
CIBC Yes Yes $29
MBNA Yes Yes $25
National Bank Yes Yes $29
RBC Yes Yes $29
Scotiabank Yes Yes $29
TD Yes Yes $29

Amex charge and credit cards

American Express is different from the rest for one reason – they offer charge cards, as well as regular credit cards. For either type of card, you can overpay and get a negative card balance.

First, the credit cards. All of them have over-limit fees should you need to make a large purchase.

Charge cards are a different beast. While they act and look like credit cards, they have 2 distinct differences:

  • charge card bills have to be paid in full every month, and
  • they have no pre-set credit limit.

The last point is key here. Charge cards only have soft limits, which reduces the usefulness of having a negative balance. Prepaying won’t help increase the limit you can make on one purchase.

Side point – it is easy to figure out what your spending limit is. Simply login to your Amex account, and click on “Check Spending Power” on the landing page.

On the next screen, you can enter your estimated purchase amount. You’ll then be told whether or not your purchase would be approved.

For this request, I’m approved for making a purchase of $2,000:

Declined spending power check with an Amex charge card

However, this extremely large purchase amount would get declined:

Approved spending power check with an Amex charge card

What personal charge cards does Amex currently offer? There are 4 of them:

This page explains the major differences between a charge card and a credit card.

BMO credit cards

All of BMO’s credit cards allow you to overpay your balance, and allow you to spend over your credit limit without incurring over-limit fees.

CIBC credit cards

CIBC has the typical $29 over-limit fee on their credit cards with an exception to their Visa Infinite Privilege cards, which have no over limit fee.

MBNA credit cards

MBNA has over-limit fees on their credit cards, however their cards only charge $25 per occurrence.

National Bank credit cards

Most National Bank credit cards charge the typical $29 over-limit fee, except for the , which doesn’t have this fee.

RBC credit cards

You can overpay an RBC credit card and all of their cards have the standard $29 over-limit fee, except for their Visa Infinite Privilege card, which waives it.

Scotiabank credit cards

Scotiabank allows cardholders to make overpayments, and all of their cards charge the typical $29 over-limit fee, including their Amex credit cards.

TD credit cards

As seen in our example above, TD’s cards can generate negative balances, and all of their cards have the typical $29 over-limit fee, with the exception of their Visa Infinite Privilege cards.

Frequently asked questions

Here are some frequently asked questions about credit card negative balances.

What is a negative balance on a credit card?

A negative balance on a credit card occurs when more has been paid towards the card balance than is owed.

Is having a negative credit card balance bad?

No, there’s nothing wrong with having a negative card balance.

What happens if my credit card balance is negative?

Simply put, you’re in a situation where the bank owes you. When you make purchases on the account, they get paid with the negative balance until it disappears. Your credit limit remains unchanged, but your purchasing power temporarily increases until the negative balance is used up.

How do I cancel a credit card with negative balance?

Before cancelling your credit card, you’ll want to get that money back. You can do that by either making new purchases to the card, or requesting the balance be sent to you.

Does a negative credit card balance affect my credit score?

Having a negative credit card balance has no effect on your credit score. Your card balance will simply be reported as $0 to the credit bureaus.

In summary

If you need a little boost in spending power on your credit card, creating a negative balance for yourself can give you what you need, but it’s not something that should be done on a regular basis.

Is overpaying your credit card something you do?

Let us know in the comments below.