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