Legal Definitions - credit balance

A credit balance describes the state of an account where the total amount of money that has been added to it, or is owed *to* the account holder, is greater than the total amount that has been taken out of it, or is owed *by* the account holder. In simpler terms, it means there is a positive amount of funds available in the account, or that money is owed *to* you by the entity managing the account.

• Example 1: Personal Checking Account

  Imagine you have a checking account at a bank. At the beginning of the month, you deposit your paycheck of $3,000. Throughout the month, you pay various bills totaling $1,500. At the end of the month, your account would show a credit balance of $1,500.

  This illustrates a credit balance because the money deposited into your account (the credit entries) exceeds the money you spent or withdrew (the debit entries), leaving you with a positive amount of funds available.

• Example 2: Utility Company Account

  Suppose you receive your monthly internet bill for $75. You accidentally set up an automatic payment for $100. The internet provider's records for your account would then show a credit balance of $25.

  Here, the payment you made (a credit entry from the perspective of your account with the company) was more than the amount you owed (the debit entry). This credit balance means the internet company owes you $25, which they might apply to your next bill or refund to you.

• Example 3: Retail Store Gift Card

  You purchase a $50 gift card from a bookstore for a friend. When your friend uses the gift card to buy a $30 book, the gift card will then have a credit balance of $20 remaining.

  This demonstrates a credit balance because the initial value loaded onto the card (the credit entry) is greater than the amount spent (the debit entry). The remaining $20 represents money the bookstore owes the cardholder in goods or services.