The pale-yellow drapes you ordered online turn out to be screaming neon. The new patio table collapses just as your family sits down to dinner. The fancy face cream you splurged on gives you a rash. There are many reasons you might want to return a purchase and get your money back. If you bought the item with a credit card, you'll get reimbursed in the form of a credit card refund. A credit card refund happens when you return a product you purchased using a credit card and get a credit to your account. Here's what to know.
When you buy something with a credit card, the merchant requests payment from the credit card issuer, not from you directly. The card issuer pays the merchant and adds the purchase amount to your account balance. You then pay the credit card issuer.
Returning a purchase works the same way, but in reverse. When a retailer issues a refund, the money doesn't go directly to you. (This is why most merchants won't give you a cash refund for a purchase made with a credit card.) Instead, they ask your credit card issuer to credit your account for the returned amount. The card issuer then posts the credit to your account. How Long Does a Credit Card Refund Take The time it takes to process a credit card refund depends on a number of factors. In general, though, you shouldn't expect to get your money back right away.
The retailer's return policy also affects how long you'll wait for your credit card refund. Many retailers promise refund times of three to five business days, while others take longer. The best way to get an idea of how long you'll wait is to check the retailer's website.
Depending on your credit card's billing cycle, it can take even longer for a refund to appear on your monthly statement. For example, suppose your credit card's closing date is the 15th of the month, and you return an item on the 16th for a refund. Because the return occurred after the closing date, the refund won't appear on that month's statement. Your statement balance often differs from your current balance, so if you're eager to see whether a credit has been issued, check your account online or use the card issuer's mobile app to keep tabs on it.
What if you don't want to wait for your credit card company to issue a refund You can ask for your refund in the form of store credit, which can be issued immediately. Just be aware that store credit won't erase the purchase amount from your credit card. You'll still owe the credit card issuer the money for the item, even though you returned it. How Does a Refund Affect Your Credit Money refunded to your credit card account is considered an account credit; it doesn't count as a payment or partial payment. If you incorrectly assume getting an account credit eliminates the need to make a monthly payment, you could end up paying late fees or even damage your credit score. Be sure to keep making payments on your balance while you're waiting for the statement credit to post.
If you make a credit card purchase, don't pay the balance off when your statement arrives, and later return the item, you'll be responsible for any interest that accrues on the purchase amount before your refund posts. If you buy an expensive item and carry a balance, this interest can be costly. Unfortunately, your refund won't reimburse you for any interest you may have paid before returning the purchase.
In certain situations, credit card returns can affect your credit score. An account credit can boost your credit score if it reduces your credit utilization ratio, which compares the total amount of revolving credit you're using to the total amount you have available. Credit scoring models consider your credit utilization ratio when calculating your credit score; reducing this ratio to 30% or less can help you avoid hurting your score.
However, a credit card refund that takes a long time to show up on your account could hurt your credit score if the purchase amount pushes your credit utilization ratio above 30%. Suppose you have a credit card with a $6,000 limit and you use it to make a $3,000 purchase that you later return. Until the $3,000 credit posts to your account, you'll be using 50% of your available credit on that card.
What if you have a really big negative balance For example, suppose you normally spend $50 a month on a credit card, but one day you use it to buy a $2,000 sofa that you decide to return. Using up the $2,000 credit from the return could take a long time if you don't normally spend much on that card. If you'd rather have the cash in hand, you can ask the credit card company to issue a refund via check, direct deposit or money order. Under federal law, the credit card issuer is required to honor this request; however, some companies will ask you to make the request in writing. Waiting GameUsing credit cards for purchases can offer several advantages compared with cash, such as purchase protection and the ability to dispute charges. However, it may take longer to get your money back via a credit card refund than it would with a cash transaction. In the meantime, you might still owe money on the credit card balance while you wait for the refund to be processed. Knowing how credit card refunds work and what to expect will help ensure that you stay on top of your payments, which helps maintain good credit.
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.
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
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 and owner of the financial literacy site Young and the Invested.
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 rules.
If you're not just returning an item, but also disputing a charge, it can take up to 150 days for a return to appear on your account. If you take this route, you must notify your card issuer of a problem with your purchase within 60 days of the transaction; the issuer then has 90 days to resolve the issue.
A credit card refund is initiated by the merchant or vendor who received the original payment. A refund is issued when you return a purchased item or receive a discount, for instance. The refund amount is credited back to your credit card account, and it typically appears as a credit on your statement.
On the other hand, a chargeback is initiated by the cardholder, and it involves disputing a transaction with the credit card company. Chargebacks are typically initiated when you believe that a transaction was unauthorized, fraudulent or the product or service received was not as described.
In this case, you contact your card issuer to dispute the transaction, and the card issuer initiates a chargeback with the merchant's acquiring bank. The merchant must then provide evidence that the transaction was legitimate and that you received the product or service as described. If the merchant can't provide sufficient evidence, the chargeback is typically granted, and your account is credited for the disputed amount.
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 of weeks later, you decided that you didn't like the 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.
Even so, it doesn't hurt to ask. In some cases, your card issuer might be willing to refund the fee, especially if the return was made right away and currency values didn't change much in the meantime.
In some cases, you might be able to receive a refund from your card issuer rather than an account credit. That's especially true if you need the money immediately to cover other bills, or it's a card you don't use often and end up with a negative balance for several months. In this case, you can call your issuer and ask to have a check mailed for the difference.
For example, if your credit limit is $1,000 and you are carrying a balance of $300, your credit utilization would be 30%. If you then make a return for a $100 refund, your utilization would drop to 20%, helping improve your score. The key is for the return to process before your balance is reported to the credit bureaus. Otherwise, your card will reflect the higher balance even though a return is on its way.
Any time your credit card gets refunded, the points, miles or cash back you earned on the original purchase will be subtracted from your rewards balance. You should see your rewards disappear once your refund is processed onto your credit card. In some cases, however, you might not see your rewards balance change until your billing cycle is up.
Returning a product you purchased on your credit card seems simple. After all, as long as you are within the retailer or store's return policy, you can typically return the item for a full refu