Credit balance definition
/What is a Credit Balance in Accounting?
A credit balance is the ending total in an account, which implies either a positive or negative amount, depending on the situation. Thus, a credit balance could refer to an asset or a payment obligation, depending on the circumstances.
What is a Credit Balance on a Credit Card?
A credit balance on a credit card means that the cardholder has a positive balance, which means that the credit card company owes them money. This situation can arise in the following circumstances:
Overpayment. The cardholder may have paid more than the outstanding balance on their card.
Refunds. A refund for a returned item or a dispute resolution may be applied to the card, leaving a surplus if the card already had a zero balance.
Promotional offers or adjustments. A cash-back reward, promotional credit, or correction from the credit card company can result in a credit balance.
For example, if your card balance is $0 and you pay $50 or receive a $50 refund, your credit balance will be -$50 in credit.
When you have a credit balance on your credit card, you may use the credit balance to offset future purchases, or request a refund from the credit card issuer. This balance does not earn interest, so it is generally better to use or withdraw it rather than leave it idle.
Examples of a Credit Balance
A credit balance applies to the following situations:
A positive balance in a bank account
The total amount owed on a credit card
A negative balance in an asset account
A positive balance in a liability, equity, revenue, or gain account
The remaining balance in a cash account with a broker after securities have been bought
FAQs
What Causes an Unexpected Credit Balance?
An unexpected credit balance can result from errors such as duplicate payments, incorrect postings, or misapplied credits. It may also occur when a customer overpays or a return is processed without a corresponding adjustment. Regular account reconciliations help identify and correct such anomalies.