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

Brendan Harkness

Brendan Harkness | Blog

Jun 27, 2016 | Updated Nov 16, 2016

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. 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 make a transaction 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 after the transaction is approved your amount of available credit is reduced, and you’ll later be billed by the credit card company.

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 This is why a consumer can’t receive a cash refund for a purchase that was originally made with a credit card.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

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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