What Happens to a Negative Credit Card Balance From an Overpayment?
Mistakes happen from time to time with credit cards. Those mistakes usually have to do with forgetting to make a payment. Sometimes, people pay too much, and occasionally someone might get confused with there statement and current balance. Those who pay more than their credit card balances end up with a negative balance.
For example, assume that Plain Jane owes $150 on a credit card. She accidentally adds an extra zero to her payment and pays $1,500. She would have a negative balance of $1,350 due to the overpayment.
When people overpay their credit cards they might be unsure of what to do. Let’s look at what happens with these overpayments.
People want to know if they can get their money back with an overpayment or if it remains on the card. That depends on how consumers proceed. To begin with, it’s important to understand the Federal Reserve Board’s Regulation Z. According to the regulation, lenders have to do three things when a borrower has a negative balance on his or her credit card.
First, the lender must credit the overpayment to the borrower’s account. Any subsequent charges are deducted from the credit. Some people choose to keep the credit on the account and have their charges deducted.
Second, the creditor must refund the remaining balance within seven days of receiving a request in writing from the consumer.
Third, if no request in writing is made, the lender must make a good-faith effort to refund the amount after six months has passed.
In most cases it is that simple, although large overpayments could trigger red flags related to fraud. Some money launderers use overpayments to wash their money. Credit card companies train employees to look for fraudulent activity when processing overpayments. If fraud is suspected, the credit card will likely be locked down so the government can investigate. When consumers pass the fraud test, the burden is still on them to claim the refund, unless they want to wait six months.
The specific process for getting refunds differs slightly from one credit card company to the next. For example, American Express and Discover might issue the refunds at different times. However, the overall process consumers go through remains the same.
Consumers need to write a letter to the credit card company addressing the overpayment. The letter should be as detailed as possible, including the payment information and date. Then the consumer needs to let the credit card company know he or she wishes to have the refund mailed.
Consumers are encouraged to use tracking when sending this correspondence. Once it arrives, the credit card company has seven days to issue the refund, but it might take several more days for the cardholder to receive it.
Overpayments happen from time to time, and they aren’t the end of the world. Credit card companies usually view these as honest mistakes. Unless it happens often or it is for an excessively large amount, it shouldn’t trigger a fraud alert. A simple letter should release the funds and get the balance back to normal.
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