Can you close a credit card with a negative reward balance?
Editor's Note
Let's say you bought a ticket to Europe last year, but you need a refund because your flight was canceled. The airline returns the fare cost to your credit card, leading to a negative balance on your card. Returned or refunded purchases don't just decrease your account balance, though. They also decrease your rewards balance.
Specifically, most credit card issuers deduct rewards for returns and refunds. If you already have a low rewards balance, these refunds can cause it to fall into the negative. Here's what you need to know about negative reward balances on credit cards.
How a negative rewards balance happens
We generally don't recommend hoarding your reward points and miles. However, if you redeem your points regularly, you may occasionally see your rewards balance go into the negative.
So, how does this happen? As it turns out, most credit card issuers will deduct rewards for the following three reasons.
Returns and refunds
As mentioned, most credit card rewards programs subtract rewards for returns and refunds, which can lead to a negative balance. However, the return won't impact your credit card account if you can secure a voucher or store credit instead of a refund.
Many merchants are happy to issue a voucher instead of a refund.
Rewards reversal
Most credit card rewards programs reserve the right to reverse rewards if a cardholder misuses the rewards program. For example, American Express has taken back rewards earned from self-referrals in the past. If something like this happens to you and you have already spent the points, you may have a negative reward balance.
Related: Biden administration unveils stricter rules for airline refunds, upfront pricing
Welcome offer reversal
Finally, your rewards balance may become negative if the issuer reverses your welcome offer. For example, American Express has reversed welcome offers for cardholders who cancel or downgrade within 12 months of opening.
You may also lose your welcome offer if you return or refund a purchase that helped you earn that offer. After all, just one return or refund could put you below the minimum spending requirements to earn the offer.
Related: Here's why you should never close your credit cards before the one-year mark
How negative reward balances are treated across issuers
Most reward programs don't provide much information about negative reward balances in their terms, so I contacted three major credit card issuers for some answers. Here's what I learned.
American Express
When you return or refund a purchase, you'll usually get a statement credit on your American Express card. This statement credit will trigger a deduction of points from your account.
Additionally, you may also lose your welcome offer. Specifically, an American Express spokesperson told TPG:
If a cardmember returns or cancels purchases made to meet the welcome offer threshold amount, we may not credit the rewards to the account.
Based on Amex's Membership Rewards terms, if you have a negative point balance, American Express will apply any points you subsequently earn to that balance. So, while it might be stating the obvious, you won't be able to redeem any points until your balance becomes positive.
But what if you want to close your card? There are a few reports online of cardmembers being charged for a negative rewards balance when closing a card. However, when asked about one of these reports, an American Express spokesperson stated:
No; this is not typical. American Express does not charge card members for points following the cancellation of their card.
You won't be charged for a negative rewards balance if you cancel your card. Still, you may want to make your reward balance positive before closing your account. After all, American Express takes potential reward abuse seriously, and you don't want to jeopardize any future relationship.
Related: Who should (and shouldn't) get the American Express Platinum?
Capital One
From my conversation with Capital One:
If you get a refund on your card, any rewards you earned from the original purchase will normally be removed from your rewards balance.
One online forum user reported that Capital One did not charge them to close a negative rewards balance account, but the negative balance was very small.
Chase
If you return a purchase, Chase will deduct the rewards originally earned from those earned on other purchases. As a result, you may see a negative rewards balance on your account.
Chase states:
The reward points earned through the purchase will be deducted from your point earnings (which can include bonus points) once the transaction has been posted to your account. If you redeemed all your reward points before making the return, this will be reflected as a negative balance in your reward point accumulation in your online portal.
One online forum user reported that they were able to close their account with a negative Ultimate Rewards point balance.
Citi
According to Citi's ThankYou Rewards terms and conditions, you'll earn points for purchases minus returns and refunds. These terms also note that if your points balance becomes negative, the program will apply all points you earn to that balance.
You can link to information about fraud, misuse, abuse and suspicious activity from most Citi application pages. Specifically, if Citi sees evidence of these activities, it may:
- Take away your accrued ThankYou Points
- Stop you from earning ThankYou Points
- Suspend or close your card or ThankYou account
- Take legal action to recover rewards redeemed and recover monetary losses
So, if you close a card with a negative point balance, Citi may or may not attempt to recover any redeemed rewards. Either way, you'll likely want to wait to close your account when your point balance is positive.
In summary, it appears as though closing an account with a negative rewards balance is handled on a case-by-case basis among all the issuers listed.
Related: The ultimate guide to Citi ThankYou Rewards
Bottom line
If you're using your credit cards as intended, you likely won't have any issues with a rewards balance that goes negative. I once had a negative reward balance after obtaining a refund on a canceled flight. But, my spending in the next month easily brought my rewards balance back into the positive range.
Some cardholders have reported experiencing no negative effects after closing a card with a small negative rewards balance. Still, I'd recommend getting your rewards balance into the positive before closing your credit card account.
Related: Why I closed my first credit card and what I'd do differently now