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

Let’s say you bought a ticket to Europe last year but you needed it refund because your flight was cancelled. The airline refunds the cost of the ticket to your credit card, resulting in negative balance on your card. However, returned or refunded purchases do more than just reduce your account balance. They also reduce 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 the balance to go negative. Here’s what you need to know about negative rewards balances on credit cards.

How negative reward balances occur

We generally do not recommend it Store your reward points and miles. However, if you redeem points frequently, you may sometimes see your rewards balance go negative.

So how did this happen? As it turns out, most credit card issuers will deduct rewards for these three reasons.

Returns and refunds

As mentioned, most credit card rewards programs deduct rewards for returns and refunds, which can result in negative balances. However, the refund will not affect your credit card account if you are able to secure a voucher or store credit instead of a refund.

Many sellers are happy to issue vouchers instead of refunds.

Reverse rewards

Most credit card rewards programs have the right to reverse rewards if the cardholder abuses the rewards program. For example, American Express does reclaim rewards earned from self-referrals in the past. If the same thing happens to you, you could have a negative rewards balance if you’ve spent all your points.

Related: Biden administration announces stricter rules on airline refunds, upfront pricing

Reverse welcome offer

Finally, your rewards balance could become negative if the issuer cancels your welcome offer. For example, American Express has reversed its welcome offers for cardholders cancel or downgrade within 12 months of opening.

You can too take your welcome offer If you return or refund the purchase that earned you that offer. After all, just one return or refund can cost you money Minimum spending required to earn offers.

Related: Here’s why you should never close a credit card before the one-year mark

How negative bonus balances are handled between issuers

Most rewards programs don’t provide much information about negative bonus balances under their terms, so I reached out to three major credit card issuers to find answers. Here’s what I learned.

American Express

When you return or refund a purchase, you will usually receive a statement credit on your account. American Express. This statement credit will trigger points to be deducted from your account.

Additionally, you may also lose your welcome offer. Specifically, an American Express spokesperson told TPG:

If cardholders return or cancel purchases made to meet the welcome offer threshold amount, we may not credit rewards to the account.

Based on Amex Membership Rewards terms, if you have a negative points balance, American Express will apply any points you subsequently earn to that balance. So while it may be obvious, you won’t be able to redeem any points until your balance becomes positive.

But if you want close your card? There are some reports online of card members being charged negative rewards balance fees when closing their cards. However, when asked about one of these reports, an American Express spokesperson stated:

ARE NOT; this is not typical American Express does not charge points to card members after their card is canceled.

You will not be charged for a negative rewards balance if you cancel your card. But you may still want your bonus balance to be positive before closing your account. After all, American Express’ takes potential reward abuse very seriously, and you don’t want to jeopardize any future relationships.

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

Capital One

From my conversation with Capital One:

If you receive a refund to your card, any rewards you earned from the original purchase will typically be removed from your rewards balance.

One online forum user reported that Capital One did not charge them a fee to close a negative rewards balance account, but the negative balance was very small.

Chase

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

Chase said:

Rewards points earned through purchases will be deducted from your points earned (which may include bonus points) once the transaction is posted to your account. If you have redeemed all your reward points before refund, this will be reflected as a negative balance during reward points accumulation in your online portal.

One online forum user reported that they were able to close their account when their Ultimate Rewards points balance went negative.

city

According to Citi ThankYou Rewards terms and conditionsYou’ll earn points on purchases minus returns and refunds. These terms also note that if your points balance becomes negative, the program will apply all the points you earned to that balance.

You can link to information about fraud, abuse, misuse and suspicious activity from most Citi subscription pages. Specifically, if Citi sees evidence of these activities, Citi may:

• Take away your accumulated ThankYou Points.
• Prevents you from earning ThankYou Points.
• Suspend or close your ThankYou card or account.
• Take legal action to reclaim redeemed rewards and recover monetary losses.

So if you close a card with a negative points balance, Citi may or may not try to reclaim any redeemed rewards. Either way, you’ll probably want to wait to close your account once your points balance is positive.

In summary, it appears that with all issuers listed, closing accounts with negative rewards balances is handled on a case-by-case basis.

Related: The Ultimate Guide to Citi ThankYou Rewards

Bottom line

If you’re using your credit card as intended, you probably won’t have any problems with a negative rewards balance. I once had a negative award balance after receiving a refund on a canceled flight. However, my spending over the next month easily brought my rewards balance back to positive.

Some cardholders reported experiencing no negative effects after closing a card with a small negative rewards balance. However, I recommend converting your rewards balance to a positive number before closing your credit card account.

Related: Why I closed my first credit card and what will I do differently now