What Happens To My Credit Card Bill When I Make A Return?

Brendan Harkness

Brendan Harkness | Blog

Jun 27, 2016 | Updated Jun 21, 2017

Credit Card Returns Are Pretty Simple

Are you suffering from buyer’s remorse because of some recent purchases you’ve made? Do you want to know how to cure it? Drive back to the mall and return some things.

As long as you’ve complied with the retailer’s return policy, when you return the item the retailer will generally issue a refund equal to the cost of the original purchase, whether you paid with cash or credit.

Here’s the quick version of what happens with your credit card when you make a return:

  1. The retailer issues a refund to your credit card account
  2. A credit for the refunded purchase will appear on your credit card transactions, usually up to one week later
  3. Cash back or points earned on the purchase are reversed

Keep reading to learn more about the process of making returns on purchases made with credit cards.

Retailer won’t accept your purchase for a return? Check your credit card’s Guide to Benefits to see if you have Return Protectionwhich could get you your refund on eligible items.

Where Does The Money Actually Go?

When you buy something with a credit card, the retailer is actually starting the process of being paid by the credit card issuer, not by the consumer who is making the purchase. Normally, once the transaction is approved your amount of available credit is reduced, and you’ll be billed by the credit card company later.

At this point, whether you actually ever pay off your balance isn’t the retailer’s problem because they’ve already been paid. In the event that an item purchased with a credit card is returned, the retailer will issue a refund to your credit card account instead of issuing funds directly to you.

Remember, the merchant is actually paid by the credit card issuer during a credit card transaction and not by the consumer. This is why a consumer can’t receive a cash refund for a purchase that was originally made with a credit card.

Making A Return Right Away

A refund for a returned item will not usually post to your credit card account instantly.

Instead it generally takes several business days and potentially even up to a week before a refunded purchase will appear on your credit card ledger. Generally when a refund is processed for a returned item within the same credit card billing cycle, you won’t be held responsible to make a payment on that specific charge.

If you were to return a purchase near or after the end of your billing cycle, then the refund for the transaction might not show on your account before your next payment is due. Regardless of the timing of the purchase and the return, if you fail to make at least the minimum payment on your account prior to the due date then you could be penalized by your credit card company in the form of a late fee. You can’t skip making a minimum payment if there is any amount due to the card issuer.

Waiting To Make A Return

Consumers do not always return an item immediately or even within the same billing cycle. Sometimes it’s not even close. Months may pass between the date of the original purchase and the return of an item.

If there is a balance on your credit card when a refund for a purchase from a previous billing cycle is issued, then the credit will simply be applied to your account, reducing your existing credit card balance.

If your credit card has a zero balance when the return is processed, a credit is generally added to the account that can be applied to future purchases. If your card remains inactive with a negative balance for several months, the credit card issuer will likely send you a check for the credited funds on the account. You can also call your credit card company to request that a check for the account credit be mailed to you, thus eliminating the wait.

If you made a purchase then carry a balance into another statement period you may be charged interest. When you make a return, that interest will not be refunded.

Can’t find your issuer’s phone number? Check out our listing of “Backdoor” Issuer Phone Numbers.

Rewards, Cash Back, and Signup Bonuses Are Returned Too

It’s worth noting that when a purchase is returned and a refund is credited to your credit card account, any reward points or cash back you may have earned on the original purchase will be lost as well.

Credit card issuers have policies to deduct previously earned reward points or cash back credit from your account in the event that a refund is issued. Otherwise, if the policy were different, there would undoubtedly be a large number of consumers attempting to game the system by piling up reward points for large purchases, only to return the purchases at a future date and keep the rewards. This will not work.

Sign up bonuses, commonly found on travel credit cards, generally follow this same rule. If you received a signup bonus based on purchases that you later return, you’ll likely also lose the signup bonus. Read the card agreement of your card to determine exactly how rewards will be handled with returns.

Returns for Transactions in A Foreign Currency

If you bought something in a foreign currency, and then you return it, what happens?

This is another area that can be complicated, and depends on the card agreement of your card, since it can vary from one card or issuer to another.

Many credit cards charge a foreign transaction fee. If your card does, it’s possible you won’t get that fee back when you make a return. If you’re in this situation where a foreign transaction fee is not refunded, you may be able to get it refunded by calling your credit card issuer and asking for a refund.

If a significant amount of time has passed since you made the purchase, the foreign currency may have gone up or down in value. Credit card companies usually use the current market value of the currency to determine how much is refunded when you make a return. That means you may lose or make money if the foreign currency has gone down or up in value since the original purchase.

Additionally, like many commodity markets, there is a spread for buying and selling currencies. That means it costs slightly more to buy a unit of currency than you would get for selling it at a given point in time. So, even if you make the purchase then immediately return it and your card doesn’t charge a foreign transaction fee, you may lose money.

Have any other questions about credit card returns that weren’t answered here? Hit the Ask button at the top of the page and ask away!

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Was this helpful?
  • bananaheim

    I have a question about credits. I have credits on my account that were for charges in August that are shown on my September monthly statement. The credits make up a substantial amount of the bill. I called the bank to have the amount due for the September statement lowered to account of the credits. I figured this is fair since the bank has been fully reimbursed for the charges because the bank had received the credit from the merchant.

    The bank told me that they would reduce the amount that was due for the September statement and that if I did not pay the full amount of the September statement (including the amount credited) I would be charge interest. Something seems very wrong about this. In essence, the bank is tell me that I will have to pay interest even though there is not longer a charge on the account.

    Has anyone else faced this situation? There should be a rule against this.

    • John Ganotis

      I don’t fully understand what you’re asking.

      1) When you say “credits on my account” are you talking about credits from returning items you previously purchased?

      2) When you say “amount of the bill” are you talking about your total balance (total credit card debt) on the card, or are you just talking about a minimum payment that is due by your next due date?

      • bananaheim

        Yes to question 1. For question 2, the “amount of the bill” I am referring to is the total balance on the statement, not just the minimum. Also, for the hypothetical below, assume that I am paying off my full balance every month.

        For example, I purchase an item on August 15 for $100. My September 1 statement shows that charge. If I pay the full statement (including the $100 charge) by September 30 I will not owe any interest on the $100 purchase. On September 15 I return the $100 item and the merchant provides a $100 credit to the credit card company and my account.

        In order to pay off the account in full on September 30 I believe that I should not have to pay the $100 charge since there is no longer a $100 debt. However, the bank is saying that I have to pay the charge as part of the September 30 statement (or they will charge me interest). Their explanation is that I will receive a credit against my October bill rather than the September bill.

        Since they have been reimbursed for the $100 charge, it seems that they are expecting me to make a $100 interest free loan to them, which doesn’t seem fair.

        I hope this makes sense. It seems simple in my head, but its hard to convey in writing for some reason.

        • John Ganotis

          It can vary from card to card, but really comes down to the terms of the cardholder agreement that you agree to when applying and later choosing to use the card.

          Based on my experience, most cards work this way: If the purchase and return credit happened in the same statement period, you wouldn’t be expected to pay for the purchase and it wouldn’t be included in the balance when the statement is generated. However, if the statement with the purchase has already been generated and a return credit is issued some time in a later statement period, the statement that was generated, with its balance, still stand. Any later adjustments get reflected in the following statement.

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