How to manage overpayments on credit cards

No one wants to pay credit card companies more than they need to. But mistakes happen, especially when juggling due dates and different payments each month. 

How do most people overpay their credit card? 

It’s not a common issue, but one of the most common ways people overpay their cards is by manually entering the wrong payment amount. Some folks aren’t careful and end up typing the wrong number. Others just aren’t good at math.

Autopay can prevent you from accidentally overpaying on your credit cards. Most credit card issuers offer three automatic payment options:

• pay the account balance in full, 
• make the minimum payment ,
• or, enter a custom amount you wish to pay.

Whenever you can, pay the balance in full, so you don’t end up paying interest charges. Setting up autopay for any of these options can insure against overpayment every month.

What happens if I've overpaid my credit card? 

More often than not, overpayment is not a bad thing. However, it can cause problems if it's a huge amount, triggering fraud actions with your card issuer, which could potentially result in your account’s closure. 

If your overpayment is significantly large, it can even raise flags around money laundering.

However, overpayment isn’t the end of the world.

1. It does not affect your credit score. Having a negative balance on a credit report does not lower or raise your score.

2. It does not increase your credit limit. Although overpaying can temporarily increase your spending power, your credit limit and credit utilization does not increase or change at all.

3. You don't earn interest for overpaying. You can't earn interest on the money that you overpay on a credit card account like you do with an interest-earning savings account.

How can I correct an overpaid credit card?

Not sure how to fix an overpaid credit card? There are a couple of options to help you get back on track:

1. Use it for new purchases. The simplest way to handle paying too much on your card is to use the extra funds for your next card purchase. This happens automatically, when the overpayment is applied against your monthly balance. 

2. Request a refund. If you want the money back, instead of applying it to your next card purchase, write your card issuer. They typically offer a couple of options, such as a check or money order. If you choose to transfer the funds via direct deposit, it can take up to seven days to appear in your bank account.

3. Do nothing. If you don’t use the money or request a refund, your credit card company is obligated to make a good faith effort and refund the amount due to you. According to the Truth in Lending Act, this process has to be initiated within a reasonable timeframe for any amount exceeding $1 in an overpayment that results in a negative balance.

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                                                          5 reasons for a negative credit card balance.

How can Bright help

Bright can make card payments for you, never paying more than you owe. 

Bright is a smarter, faster way to manage your credit card payments. Powered by MoneyScience™, a new patented system built on 34 algorithms, Bright studies your finances and makes smart payments for you, always on time and always optimized to save on interest charges. With Bright, you'll pay off credit card debts faster, automatically.

If you don't have it yet, download the Bright app from the App Store or Google Play. Connect your bank account and your cards, set your own goals, then let Bright get to work.

Recommended Readings:

How to be a smart credit card user

What is a negative balance on a credit card?