No matter how savvy of a shopper you are, returns happen. Maybe you bought a defective item, or the guilt of an unnecessary purchase drove you to make a return. No matter the reason, returning an item for a refund is generally a straightforward process – as long as you kept that pesky receipt, anyway.
However, when you get a refund on a purchase made with a credit card, there are a few considerations to keep in mind. Due to the way credit card transactions work, you will have to wait several days to see your available credit come back. And if you earned rewards, those will likely disappear.
Before you ask for a refund on your credit card purchase, find out everything you should know ahead of time so there aren’t any surprises.
How Credit Card Refunds Work
When you make a purchase and pay with your credit card, you don’t actually pay money to the merchant. Rather, the merchant is paid by your credit card company.
Once the transaction is approved by your card issuer, your available credit goes down. Even though the merchant has been paid, you aren’t billed by the credit card company until later. So what if you end up returning the item you purchased for a refund?
Since you didn’t pay the retailer directly, it won’t refund you directly, either. Rather, the retailer will issue a refund to your credit card account. This is why you usually can’t receive a refund in any form but the original payment method. It has to go through the credit card company once again.
How Long Does a Credit Card Refund Take?
When you make a purchase on a credit card, the purchase amount that hits your account balance will be reflected as a payment requirement on your monthly statement. “However, if you choose to return the item and request a refund, you will not receive cash for this return but a credit equal to the amount of the original purchase on your account,” says Riley Adams, a CPA, senior financial analyst at energy company Entergy and owner of the blog Young and the Invested.
The length of time it takes to receive that credit to your account can vary widely. Jacqueline Devereux, a writer for personal finance education website SproutCents, says, “Refunds typically take five to seven business days to reflect back on your account once they have been issued.”
But some circumstances can affect how long a refund takes. The timetable can be much shorter – or much longer – depending on how you make the return and that particular retailer’s policies. Some retailers credit your account immediately. But you could wait much longer on a refund if you mail the item rather than make the return at the store, in part because you have to account for shipping time. That’s especially true if you’re returning an international purchase.
Fortunately, some credit cards offer return protection. With this protection, your card company will still issue a credit to your statement for the purchase amount as long as you meet the requirements, even if you’re unable to return an item directly to the merchant because you don’t meet the merchant’s return requirements.
If you’re not just returning an item, but disputing a charge, it can take up to 150 days for a return to appear on your account. However, if you take this route, you must notify your card issuer of a problem with your purchase within 60 days of the transaction; it then has 90 days to resolve the issue.
What Happens to the Rewards?
Rewards points and other perks that are earned on purchases that get returned disappear once that return happens.
“When making this purchase on a rewards card, you received some sort of benefit, be it points in a loyalty rewards program, cash back credits or some other compensation arrangement incentivizing you to make purchases with this card,” Adams says. “However, much like the retailer returning the money received for the purchase, the cardholder too must return any associated rewards points.”
That’s true of all types of rewards, including sign-up bonuses and other incentives based on spending.
For example, say you needed to spend $3,000 within the first three months of account opening to earn a sign-up bonus. At the end of the third month, you bought a new refrigerator for $800. That brought your total spending just past the $3,000 mark, and you received your bonus soon after. However, a couple weeks later, you decided that you didn’t like that fridge and ended up returning it. Since the $800 was ultimately refunded, you technically didn’t spend the full $3,000 and would lose your bonus……Read more>>