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

Brendan Harkness

Brendan Harkness | Blog

Jun 27, 2016 | Updated Jun 20, 2019

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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 in 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 This is why a consumer can’t receive a cash refund for a purchase that was originally made with a credit card.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.

What if you make a purchase, earn some rewards, redeem those rewards, and then return the purchase? In that case you’ll likely wind up with a negative rewards balance. You’ll have to earn more rewards, getting back to zero, before you’ll end up with a positive rewards balance again.

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? Contact us and ask!

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  • twittertwirl

    Hi! I have a question. I am carrying a substantial balance with a promotional 0% APR on a credit card. I then made a purchase with this card in error – I intended to use a different card that looks almost the same. I realize that I will have to pay off the card completely in order to not be charged interest on my very small purchase, but I don’t have the money to pay off the balance completely. What if I return the purchase? Will I still have to pay interest on the adjusted amount because the card is not paid off in full? I made the erroneous purchase only yesterday and i think I will just return it and buy again with a different card… to see what happens… but I feel it won’t save me from paying interest… Thanks!

    • John Ganotis

      You could try returning it. I’m not sure whether that would work, but it seems logical. Ultimately it comes down to the terms of your card. You may also be able to make a payment directly on the purchases balance as opposed to making a payment toward the promotional balance. Please comment back and let me know if making the return works to avoid that interest!

      • twittertwirl

        Hi, John! Thanks for the word. I returned the item that same day. The next day I called a rep, and someone with a thick Indian accent told me not to make mistakes in the future and wait until the statement comes in. Statement came in. I am being charged interest on the purchase. The refund money is under the “payments and credits” section on the statement. It’s such a small amount in interest, that i will just live with it. I don’t really want to call the company again.

  • Allen Grant

    Hi there.
    A company with which I have more than one credit card registered with them are telling me that they have refunded an amount to one of my cards.

    The problem is however they have made the refund to a card which was not used during the transaction, ie, to the wrong card. The card issuer is rightly saying, no refunds have been made by this company.

    If this company tried to make this refund to the wrong card would an alert bounce back to them informing them so and the refund subsequently be canceled.

    Thanks in anticipation and regards. Allen Grant.

    • John Ganotis

      I’m not sure if they would get any kind of notification. I recommend you contact the merchant that did the refund to see if they can refund it to the correct card.

      • Allen Grant

        Hi.

        I’ve today received some documents from my card issuer which confirm what they initially stated.

        So it’s back to the merchant as you have suggested.

        Regards and thanks for your help. Allen Grant.

  • TJ

    I recently got approved for a Chase Sapphier Preffered card and want to make sure I hit the min spendign limit in order to get the bonus. If I were to purchase $4000 – say in refundable airline tickets, earn the points for the bonus, use those point to book our upcoming trip and then after redeeming the points return the refundable airfare at a later point? What are your thoughts on this? Any suggestions/advice is greatly appreciated!

    • Brendan Harkness

      I’d say you’re playing with fire there, though it’s tough to say exactly what would happen. Card issuers are definitely aware of this scheme. When you make a return the card issuer will usually deduct any rewards you earned from the purchase, including signup bonuses. If you had already redeemed those points, you may wind up with a negative rewards balance for that amount. If you make the return, redeem the points, then close the account, you risk hurting your relationship with Chase. There may be a possibility of Chase coming after you if you close the account like that, but I bet that’s unlikely.

      I’d suggest checking out some other ways to meet minimum spend requirements here: https://www.creditcardinsider.com/blog/get-huge-cash-back-free-travel-credit-card-signup-bonus-offers/#how-to-meet-introductory-minimum-spend-requirements

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