By It’s easy to assume that you know everything about your credit card, but there are actually a lot of factors that can impact your balance. In this post, you’ll see how these factors work and what they mean for you as a consumer. Why is my credit card balance negative? Let’s discuss the factors below:
Fees
Credit card companies charge you fees for using your card. You can have a negative balance as per SoFi experts, “If you had a fee canceled or removed from your account, this could happen as well. This could also happen in the case of a credit card chargeback.” The most common types of fees are:
- Late fee: This is charged if you don’t make a payment on time. The amount depends on your credit card company and the type of account you have.
- Annual fee: Some credit cards have this fee to pay for the rewards program or other perks, like concierge services. If you think that a high annual fee is worth it, then go ahead and sign up for it! Just make sure to pay off your balance every month so that you don’t get into trouble with interest rates and late payments.
Interest charges
Interest charges are one of the biggest factors in credit card debt, so it’s important to understand how they work. Interest is charged on the entire balance due each month. In other words, if you have a $1,000 balance and make a payment of $500, only half of your payment will go toward paying off that debt—the other half goes to covering interest charges that have accumulated since your last payment.
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Payment amounts
The amount you pay each month is an important factor in determining how much credit card debt you’ll have.
The smaller your payments, the longer it will take for you to get out of debt. For example, if you pay only the minimum balance each month, it could take years to pay off your debt.
The size of the payment can also affect interest charges and fees. If your payment isn’t big enough to cover those costs as well, then these additional charges will accumulate on top of what’s already owed and become part of future payments (and even more interest).
Changes to your credit limit
You can find your credit limit by logging into your account or by calling customer service. If you’re worried that the card issuer has increased your credit limit without informing you (or decreased it), contact them directly.
What happens if you go over your credit limit?
If you exceed your total monthly balance, typically, the first time this happens, they’ll place a hold on all of your charges until they receive more information from the merchant and the bank issuing the card.
They may also ask for proof of purchase before releasing any funds back to you. Suppose this continues to happen regularly and indefinitely. In that case, eventually, they might close down your account altogether, depending on their policies and how many times this occurs within a certain time frame.
Credit card balances are one of the major sources of debt for consumers. The higher your credit card balance, the more likely you are to be in debt. To avoid falling victim to credit card debt, you must understand how factors like fees, interest charges, payment amounts and changes to your credit limit can impact your overall balance.
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