Can you close a credit card with a negative reward balance?

Let’s say you bought a ticket to Europe last year but now you need to get a refund because your flight is canceled. The airline returns the cost of the fare 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 a negative rewards balance. What happens next?

Here’s what you need to know about negative rewards balances on credit cards.

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How a negative rewards balance happens

Generally, you shouldn’t hoard points, for many reasons. If you follow this advice and spend your rewards soon after they post to your account, that’s generally a good thing. But, keeping a low rewards balance means you may occasionally see your rewards balance go negative.

Generally, a credit card issuer will deduct rewards for one of three reasons. So, let’s take a closer look at each of these reasons.

Returns and refunds

Most credit card rewards programs will subtract rewards for returns and refunds, which could lead to a negative balance. But, you may be able to ask the merchant for a voucher or store credit. This way, the refund or return won’t be visible on your credit card account. Many merchants are more than happy to issue a voucher in place of a refund.

Related reading: Can you get a refund after you accepted a voucher?

Rewards reversal

Most credit card rewards programs reserve the right to reverse rewards. For example, programs may take back rewards if you misuse the program.

Recently, we saw reward reversals affect cardholders who abused limited-time elevated grocery bonus earnings. And, we’ve previously seen American Express take back rewards earned from self-referrals. In these scenarios, you may end up with a negative reward balance if you already spent the points.

Welcome bonus reversal

Finally, your rewards balance may become negative if the issuer reverses your welcome bonus. For example, American Express has reversed welcome bonuses for cardholders who cancel or downgrade within 12 months of opening.

You may also lose your welcome bonus if you return or refund a purchase that helped you earn that bonus. After all, just one return or refund could put you below the minimum spending requirements to earn the bonus.

Related: Here’s why you should never close your credit cards before the one year mark

Negative rewards balances across issuers

Most reward programs don’t say much about negative rewards balances in their terms. So I reached out to three major credit card issuers to get 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 bonus. 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 the Membership Rewards terms, if you have a negative point balance American Express will apply any points you subsequently earn to that balance. So 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 card members 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 cancelation of their card.

So, you won’t be charged for a negative rewards balance if you cancel your card. But, you may still want to get your reward balance positive before closing your account. After all, American Express’ welcome bonus eligibility tool and rewards clawbacks indicate that the company takes potential reward abuse seriously.

Related: Who should (and who shouldn’t) get the American Express Platinum?

Chase

If you return a purchase, Chase will deduct the rewards originally earned from the rewards earned on other purchases. As a result, you may see a negative rewards balance on your account.

Chase’s program agreements don’t address what happens if you close an account with a negative reward balance. At the time of publishing, Chase had not responded to my questions for this story.

One online user reported closing a card with a negative 50,000 Ultimate Rewards points balance with no apparent issues. However, I wouldn’t put too much weight on this one experience. After all, we don’t know the specifics of this user’s case. And, we don’t know whether this user may have issues being approved for another Chase card in the future.

Related: Chase recently made changes to its credit card lineup – here’s everything you need to know

Citi

The Citi ThankYou Rewards terms state 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 your balance.

So, you won’t be able to use the points you earn until your balance is above zero. But, Citi doesn’t address what happens if you want to close a card with a negative point balance. And, Citi did not respond to my questions for this article.

However, you’ll find a broad section about fraud, misuse, abuse and suspicious activity accessible from most Citi application pages. Specifically, this section notes that 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 could attempt to recover rewards redeemed. Of course, Citi might not do so. Nonetheless, you’ll likely want to wait to close your account until your point balance is positive.

Related: Is Citi ThankYou Rewards the most underappreciated and misunderstood program?

Bottom line

If you’re using your cards as intended, you likely won’t have any issues with a rewards balance that goes negative. For example, a refund on a canceled flight once took my reward balance negative. But, my spending in the next month easily brought my rewards balance back into the positive range.

Some cardholders have reported that they experienced no negative effects after closing a card with a small negative rewards balance. And, this might happen if you close a card with a negative rewards balance. But, I’d recommend getting your rewards balance into the positive before closing your credit card account.