How Do Refunds Work on Credit Cards?

No matter how selective you are when it comes to the purchases you make, you might find yourself returning the item or seeking a refund because of defects or other issues. That will leave you wondering how do refunds work on credit cards? The more you know, the easier it will be to monitor your credit card and ensure you receive the money that is due to you. Learn all about credit card refunds and what to expect.

What is a Credit Card Refund?

There are some nuances to various terms that refer to money you get back from your credit card. You’ll receive a refund when you return an item that you purchased using your credit card. These credits often show up on your account within 3-5 days of the return.

Your decision to return products should have no bearing on your credit score so long as you pay your credit card balance on time, regardless of whether the refund has hit your account yet. 

Refunds differ from chargebacks. In a refund situation, the merchant initiates the refund for the product or service you are returning or had an issue with.

In contrast, during a chargeback, the cardholder initiates a dispute of a transaction. Generally, this happens in situations where there is an unauthorized charge or fraudulent activity on the account. The merchant must then provide proof of the transaction and that you received the product or service as promised. In cases where the merchant can’t provide sufficient evidence, you’ll receive a statement credit.

Types of Refunds

Before you start questioning whether you were properly credited for a refund, take a moment to learn the various types of refunds you can get from most merchants.

Cash Refunds

In a cash refund, the merchant supplies money back to the customer, generally using their original form of payment. So if you paid with a credit card, you’ll see the refund there. But if you paid using cash or a debit card, that’s how you’ll get your money back.

Statement Credits

In other situations, you’ll get a statement credit with the merchant. This means that you’ll have funds that you can use toward future purchases with the merchant. You might get a statement credit when you return an item outside the return window or when you take advantage of a warranty claim. Incorrect charges on your account or mistakes from the merchant could be another reason for a statement credit.

Returned Purchases

When you return an item you purchased, you can get that money back in a variety of ways. You might get it back on your original form of payment, as a gift card, statement credit or in exchange for new items you would like to purchase with the company. It’s up to you how you spend the money based on the merchant’s policies.

Pros and Cons of Credit Card Refunds

As with any financial tool, a credit card refund has its pros and cons. Consider these when requesting your money back from a merchant.

Pros

• Simple process that requires no exchange of cash
• Goes back to your credit card to eliminate the original charge
• Generally makes the return process fast

Cons

• Can take several days to post to your account
• Requires that you monitor your account to ensure it posts properly
• Can make for messy accounting if your credit card is due while the refund is pending

Eligibility for Refunds

Each merchant has the right to set forth its own requirements for whether items may be returned or not. In some cases, it varies based on the product category you’re inquiring about returning while other merchants have a blanket return policy.

Often, merchants require that you provide the following:

• Proof of purchase (such as a receipt)
• The credit card you used in the transaction
• Adherence to the return policy deadlines, such as returning the item within 30, 60 or 90 days

A merchant does have the right to deny you a refund if you don’t follow its rules for acquiring one.

If for some reason the credit never posts to your account or your credit card issuer is giving you a hard time about the refund, you can submit a complaint with the Consumer Financial Protection Bureau (CFPB).

How to Request a Credit Card Refund

If a product or service does not meet your standards or expectations, you can seek a refund. Here are the two ways to seek a refund when you aren’t satisfied.

Contact the Merchant Directly

Starting with the merchant is the best course of action. This will be a faster process than disputing the charge with your credit card company or bank as long as the merchant is willing to work with you.

You can visit the merchant in person or contact their customer service team. Explain why you’re seeking a refund and how you can resolve the issue.

Perhaps you were overcharged or you might not have gotten the service you were promised and are seeking restitution for that. Or you might have purchased a product that is still under warranty but not performing the way that it should.

Contact Your Credit Card Company or Bank

If you can’t resolve the situation with the merchant, you might need to reach out to your credit card company or bank. In this case, it isn’t a traditional refund but a disputed charge. Your credit card company will review the charge and reach out to the merchant to ensure they keep up their end of the deal.

This process can take up to 90 days, which is why it isn’t the preferred method for seeking a refund. 

Common Factors That May Affect Your Refund Request

Once you work with a merchant to receive a refund for a product or service, a few factors might come into play. 

Negative Balance on the Credit Card Account

Depending on how much the refund is for and what you’ve charged to your account recently, you might see a negative balance on your credit card. You don’t need to be alarmed. This will show as a credit until you spend that money elsewhere. 

For example, if you currently have a balance of $20 on your account and return a $50 sweater, you’ll have a $30 credit on your account until you purchase something else. If you buy $100 in groceries, you’ll now have a $70 balance on your credit card.

Status of the Transaction in the Billing Cycle

If you’re in the final days of a billing cycle when you return an item, the refund money might not be posted to your account until the next billing cycle. If that happens, you should still pay your credit card balance in full to avoid negative effects on your credit. Then you’ll have a negative balance on your account during the next billing cycle until you charge an item to your card.

What Happens If the Merchant Refuses to Issue a Refund?

If the merchant refuses to issue a refund, you can challenge the charge with your credit card company. Your credit card company will then complete a thorough investigation into the charge based on why you are challenging the charge.

You might also consider going to another department or customer service management for the merchant to ensure you receive your refund if you are within your rights to request one.

How Do Refunds Affect Your Credit Score?

Refunds to your credit card have no bearing on your credit score. Credit cards can impact your credit score when you fail to pay them off each month or when you use too much of your revolving credit. But a refund has financial benefits and no drawbacks.

A Simple Way to Get Money Back for Products or Services You Don’t Need

So how does a refund to a credit card work? The process is generally simple and helps most consumers get money back from products or services they realize they don’t need. Just be sure to monitor your credit card statements to ensure the credit posts within a few days and you’ll have a simple refund process.

Frequently Asked Questions