-1

I have a Visa credit card, issued by a German bank. The card allows me to carry a positive balance and even pays a small interest on it (called Visa Sparen -- Visa Saving). I find this convenient, because with a standing order it means that most likely I will never accidentally run into credit card debt. But it also sounds counter-intuitive that a credit card allows positive balance and pays interest. It's the first time I have encountered this. What I usually hear is that credit card users accrue some negative balance over the course of a month or so and (usually) pay it off at regular intervals.

Thus I wonder: Is this a special thing with either my German bank or Visa; or do many credit card companies allow a positive balance that pays interest?

To specify in response to an answer: By positive balance I mean that I have credit (the bank/card issuer owes me money); by negative balance I mean that I owe the bank or card issuer money.

2
  • 2
    Danish banks commonly issue Visa cards that draw funds from ordinary current accounts. Whether these accounts even allow a negative balance is a matter of a separate agreement between the bank and the customer. Before interest rates plummeted in the last decade or so, the connected accounts usually bore interest -- they don't today, but that is not related to the Visa card. Commented Mar 10, 2019 at 13:20
  • @HenningMakholm This confirms my hunch that credit cards connected to some hybrid savings/loan account tend to be more common in Europe than in the US, where the positive balance on what is actually a loan account seems to be a bit of an anomaly or tweak rather than a purpose (as RonJohn's answer implies). Commented Mar 10, 2019 at 13:44

2 Answers 2

4

We have several questions on this site about people wanting to know about paying money to their credit card to artificially give them a higher credit limit. Based on the questions and answers the ability to do so is widespread. Sometimes this also happens when a person returns an item to the store after sending money to pay the credit card bill.

Thus I wonder: Is this a special thing with either my German bank or Visa; or do many credit card companies allow a positive balance that pays interest?

I have not heard of a bank or card paying interest on that positive balance, so I don't know how widespread it is. My credit card will send a check if I leave a positive balance on my card for too long.

I am not sure what benefit you would get, unless the interest rate was highly competitive compared to a savings account. I understand when people who have credit cards with a low credit limit need to use the credit card to pay for an item over their limit, so they pre-pay the card before they buy the item.

I have to wonder which is more risky: keeping an extra $500 on my credit card, or an extra $500 in my savings account?

I find this convenient, because it means that most likely I will never accidentally run into credit card debt.

It is normal to have a negative balance on the card during the month. If you always pay the bill by the due date, and you use the card frequently you will always have a negative value. The key is paying the bill by the due date, it avoids interest.

What I usually hear is that credit card users accrue some negative balance over the course of a month or so and (usually) pay it off at regular intervals.

People who pay multiple payments a month, are trying to keep their balance below 30% or even 10% of their limit. This can help their credit score.

3
  • Interesting points, thank you. In my particular case, credit score is not an issue because the German equivalent, the Schufa score, doesn't take credit card balances into account. The interest is roughly what your would get on a savings account (call money rate). Commented Mar 10, 2019 at 13:11
  • 2
    In ancient times (i.e. when credit cards were just ramping up), many credit card companies did pay interest (at 1.5% per month yet!) on positive balances because their computers were programmed to tack on interest at 1.5% per month on the statement balance, and with the wrong sign on the balance, the interest was paid to the account holder instead of being charged to the account holder. Naturally, this state of affairs didn't last very long and the credit-card agreements were changed to specifically say that positive balances would earn no interest. Commented Mar 10, 2019 at 14:25
  • I would word the agreement so all balances would earn the interest towards the bank (i.e. negative interest in case of positive balances). Commented Feb 19, 2020 at 6:48
2

do many credit card companies allow a positive balance

Chase, at least in my personal experience, in the US, allows your card to have a "positive" [really it's a negative] balance.

that pays interest?

No, it's doesn't pay interest.

What I usually hear is that credit card users accrue some negative [positive] balance over the course of a month or so

That's how credit cards works, their purpose.

11
  • 2
    In practice the purpose of "credit" cards is simply to allow making payments without the overhead of manipulating physical cash. The fact that this primary function is (in some countries) usually coupled with an unsecured loan facility for the amounts being paid is just a historical accident, stemming from the fact that it used to be technologically infeasible to verify a positive balance at the time of transaction. Commented Mar 10, 2019 at 13:16
  • 2
    As I said, the name is a historical misnormer. In practice "credit card" just means a payment card whose transactions are processed through a particular set of protocols, no matter which kind of account (loan or deposit) is eventually backing those transactions. My one credit card (a Visa) draws money directly form my current account; the other one (a Mastercard) draws money from a short term loan that does not revolve. Commented Mar 10, 2019 at 13:24
  • 3
    Yes, I am Danish. And I'm aware that the function of being a payment card has in the US become coupled with revolving loans, but that is only one country, and the question is not specifically about the US. Commented Mar 10, 2019 at 13:39
  • 2
    Credit card companies will get upset and eventually close your account if you consistently carry a significant positive balance. It's a regulatory issue: you're treating the account as a deposit account, but it's not FDIC insured.
    – user71659
    Commented Mar 10, 2019 at 19:14
  • 1
    @chepner: "Used to be common?" That's what "debit card" means in the US, and is by far the most common type of card attached to a deposit account (the other kind is called "ATM card" and cannot be run as a credit card, virtually all banks will give that type only if the consumer demands one)
    – Ben Voigt
    Commented Mar 10, 2019 at 20:16

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .