Skip to content

Reader Question: Does overpaying hurt me with card issuers?

April 10, 2020
4 min read
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

Editor’s note: This article is part of a new weekly column to answer your credit card questions. If you would like to ask us a question, tweet us at @thepointsguy, message us on Facebook or email us at info@thepointsguy.com. Here at TPG we try to make the best recommendations for credit cards- whatever your situation. Whether you're a travel card guru or a college student seeking to open their first account, we're here to help you make the best of your situation. But what happens if you already have credit cards, use them and then pay- no, overpay- them when your statement closes?

[pullquote source="Vaughn (from Seattle)"]I always pay my cards in full every month and keep my utilization under 5%. Usually, I pay all charges, including pending, about 2 days before each statement closes so that each card would close at zero.

Because of this strategy, I will sometimes overpay if pending charges are close to the closing date. This sometimes results in having a credit at closing.

Since my utilization is low on each card and my limits are relatively high, it shouldn’t read as a back channel limit increase, but I’ve heard horror stories about people who’ve overpaid their cards.[/pullquote]

New to The Points Guy? Sign up for our daily newsletter and check out our beginner's guide.

Why you shouldn't overpay your credit cards

Fortunately for Vaughn, overpaying your credit card doesn't hurt your credit score. Credit card companies have no way of indicating a negative balance on your card, so your surplus balance will instead be shown as $0. Still, you should avoid overpaying your card as much as possible. Why? Because every penny you pay in excess of your balance faces an opportunity cost. Credit card accounts don't bear interest on your surplus payment, so this is worse than, say, simply stashing those funds in a low-yield savings account.

Sign up for our daily newsletter

There's another reason, though, that overpaying isn't a good idea. While banks are mandated to make a good-faith effort to refund your money if your card goes unused for six months, there's no guarantee that you'll receive it. If you're no longer at the same mailing address, it's very possible that you'll miss the money. Once the effort is made, credit card issuers are then absolved of their duties and that money can be lost.

You can always request a check from the bank before the six months, though you'll often have to call or email in order to make the request.

What is the right credit utilization?

It can be difficult finding the right amount of credit you should be using each month. Vaughn states that he likes to keep his credit card utilization under 5%, and this is a good amount. While some experts say that you should be wary of utilizing more than 30% of your credit at any given time, there is no hard and fast rule for how much you should maintain on a monthly basis.

One thing to be aware of, however, is the danger of keeping your utilization at a flat 0% at all times. While this may make sense in theory- as in, "I always pay the banks on time and never owe money at statement close."- in reality, it could damage your credit score. If you always pay all your balances before your statement closes, other banks will it simply looks as if you've never used your card at all. Of course, the goal of a credit score is to establish that you're a reliable borrower, and one who never borrows appears to be a much riskier choice than someone who regularly charges and then makes payments when they're due.

Related Reading: 6 things to do to improve your credit

Bottom line

While it won't hurt you or your credit score to overpay your credit card, you shouldn't do it. The money you're giving the bank can instead be used for much better things, even something as simple as a savings account. It can also be difficult to recoup that money if you don't end up using it or the card. Overall, it's just a better idea to pay what's due and keep the rest in your pocket.

Featured image by (Photo by Orli Friedman / The Points Guy)

Top offers from our partners

How we chose these cards

Our points-obsessed staff uses a plethora of credit cards on a daily basis. If anyone on our team wouldn’t recommend it to a friend or a family member, we wouldn’t recommend it on The Points Guy either. Our opinions are our own, and have not been reviewed, approved, or endorsed by our advertising partners.
See all best card offers

TPG featured card

Best for earning alternative rewards for travel purchases
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
3 / 5
Go to review
Apply for Credit One Bank Wander® Card
at Credit One Bank's secure site

Rewards

1 - 10X points
10XEarn 10x points on eligible hotels and car rentals booked through the Credit One Bank travel partner site
5XEarn 5x points on eligible travel, dining, and gas
1XEarn 1x points on all other purchases

Intro offer

Earn 10,000 Bonus Points
Earn 10,000 bonus points after spending $1,000 on eligible purchases in the first 90 days and redeem for a $100 statement credit, gift cards, or travel

Annual Fee

$95

Recommended Credit

Fair/Good
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

The revamped Wander Card from Credit One Bank earns cardmembers up to 10 points per dollar spent on eligible travel purchases. With no foreign transaction fees, the card is also great for international travel. However, points earned from this card can only be used at a fixed value, so it may not be the best option for those striving to get maximum value from their rewards.

Pros

  • This card has no foreign transaction fees and earns up to 10 points per dollar on travel purchases through the Credit One Bank travel partner site.

Cons

  • While cardholders can earn a significant amount of points on travel purchases, there isn't any way to redeem points from the Wander Card for maximum value (beyond 1 cent per point).
  • Earn 10,000 bonus points after spending $1,000 on eligible purchases in the first 90 days and redeem for a $100 statement credit, gift cards, or travel
  • Earn 10x points on eligible hotels and car rentals booked through the Credit One Bank travel site
  • Earn 5x points on eligible travel, dining, and gas
  • Earn 1x points on all other purchases
  • Redeem your reward points for statement credits, gift cards, merchandise, flights, hotels, and more
  • With $0 Fraud Liability, you won’t be responsible for unauthorized charges
  • Free Online Credit Score and Credit Report summary, terms apply
  • If you are a Covered Borrower under the Military Lending Act, you may get a different offer
  • See Rates & Fees
Apply for Credit One Bank Wander® Card
at Credit One Bank's secure site
Terms & restrictions apply. See rates & fees
Best for earning alternative rewards for travel purchases
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
3 / 5
Go to review

Rewards Rate

10XEarn 10x points on eligible hotels and car rentals booked through the Credit One Bank travel partner site
5XEarn 5x points on eligible travel, dining, and gas
1XEarn 1x points on all other purchases
  • Intro Offer
    Earn 10,000 bonus points after spending $1,000 on eligible purchases in the first 90 days and redeem for a $100 statement credit, gift cards, or travel

    Earn 10,000 Bonus Points
  • Annual Fee

    $95
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    Fair/Good

Why We Chose It

The revamped Wander Card from Credit One Bank earns cardmembers up to 10 points per dollar spent on eligible travel purchases. With no foreign transaction fees, the card is also great for international travel. However, points earned from this card can only be used at a fixed value, so it may not be the best option for those striving to get maximum value from their rewards.

Pros

  • This card has no foreign transaction fees and earns up to 10 points per dollar on travel purchases through the Credit One Bank travel partner site.

Cons

  • While cardholders can earn a significant amount of points on travel purchases, there isn't any way to redeem points from the Wander Card for maximum value (beyond 1 cent per point).
  • Earn 10,000 bonus points after spending $1,000 on eligible purchases in the first 90 days and redeem for a $100 statement credit, gift cards, or travel
  • Earn 10x points on eligible hotels and car rentals booked through the Credit One Bank travel site
  • Earn 5x points on eligible travel, dining, and gas
  • Earn 1x points on all other purchases
  • Redeem your reward points for statement credits, gift cards, merchandise, flights, hotels, and more
  • With $0 Fraud Liability, you won’t be responsible for unauthorized charges
  • Free Online Credit Score and Credit Report summary, terms apply
  • If you are a Covered Borrower under the Military Lending Act, you may get a different offer
  • See Rates & Fees