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I have a credit card with a credit line of $400. I have the whole $400 available to spend right now. I received a refund of $400 from a company. That makes my total available balance go up to $800.

So I have $800 available to spend on a credit card that has $400 credit limit.

Here is my question:

If I were to spend $400 on my credit card, do I owe that money back? Here is why I think this: If I were to spend say $400 on this credit card, my available balance goes down to $400 and my credit limit is still $400. So I technically have not used up any of my credit.

Does that make sense? Or am I just being really dull right now?

  • Note that depending on the company you can still not spend 800$ (or even 401$) in one payment. The limit still applies. – Aganju Sep 5 '17 at 23:07
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    You have a positive balance! – henning Sep 6 '17 at 12:25
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You are correct. If you paid your bill and then received a refund, now the credit card (bank) owes you $400. You can spend $400 without owing anything. Or, if you do nothing and don't use the card anymore, after a while they'll probably send you a check for $400. Or, if you don't plan on using the card anymore, you could call them and ask them to send you a check. If it's your regular card, just spend like you normally would and the first $400 will be "pre-paid".

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The most important number on your credit card statement is not your available credit. The number you should be focusing on is your account balance.

Before the refund, you had a balance of $0. That means that you did not owe the bank anything.

You then got a $400 refund. This put your account balance at +$400 (sometimes shown on your statement as $400 CR). This means that you have a credit of $400, or the bank owes you $400.

If you now spend $400 at a store, your balance will go back to $0.

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    Worth noting it could also be written as ($400) (this confused me before) – Alexander Sep 6 '17 at 4:17
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    Also I think it's useful to mention what the credit limit is in the context of your explanation. It's the most negative value the bank will let your balance reach before rejecting transactions and screwing you with all kinds of fees. – Alexander Sep 6 '17 at 4:19
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I'm sure it depends on the company, but I routinely run balances greater than 0 on my credit card.

The reason is simple: I already budgeted to spend the money, I know I'm going to spend the money, and it's easier to put the extra money on the card at the beginning of my budget period rather than waiting until I spend the money and get a bill.

There are 2 relevant numbers: First is the balance on your bill. It can show a positive or negative value, as people have talked about. The balance on my card tends to update fairly infrequently. The second is the available credit. When I overpay on my card, the available credit does not show more than the available debt. The latter value, however, updates for me immediately -- I can see within minutes any transaction on my credit card based on the credit available.

One important caveat: Refunds don't always immediately process. You may have to wait days or weeks until that money shows up in your account. Spending the money before it appears in your account will cause your card to behave exactly as if you don't have the money.

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