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

10.05.2024 - 16:11 / thepointsguy.com / Airlines

Let's say you bought a ticket to Europe last year, but you need a refund because your flight was canceled. The airline returns the fare cost 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 it to fall into the negative. Here's what you need to know about negative reward balances on credit cards.

We generally don't recommend hoarding your reward points and miles. However, if you redeem your points regularly, you may occasionally see your rewards balance go into the negative.

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

As mentioned, most credit card rewards programs subtract rewards for returns and refunds, which can lead to a negative balance. However, the return won't impact your credit card account if you can secure a voucher or store credit instead of a refund.

Many merchants are happy to issue a voucher instead of a refund.

Most credit card rewards programs reserve the right to reverse rewards if a cardholder misuses the rewards program. For example, American Express has taken back rewards earned from self-referrals in the past. If something like this happens to you, you may have a negative reward balance if you have already spent the points.

Related: Biden administration unveils stricter rules for airline refunds, upfront pricing

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

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

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

Most reward programs don't provide much information about negative reward balances in their terms, so I contacted three major credit card issuers for some answers. Here's what I learned.

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 offer. Specifically, an American Express spokesperson told TPG:

Based on Amex's Membership Rewards terms, if you have a negative point balance, American Express will apply any points you