Ever go overboard when shopping, then feel guilty when you get home with your haul? (Me, neither.) Or maybe that button-down you bought your brother doesn’t fit him, or the rug you bought doesn’t match the living room paint when you see it in place.
In most cases, you can return the item and get your money back, as long as the retailer’s policy allows it and you’re within the time window permitted for returns.
But if you paid for the purchase using a rewards credit card, what happens to your points when you get a refund? Well, you'll probably be returning those, too.
Rewards and returns
When your credit card gets refunded for your return, the points, miles or cash back you earned on that purchase will be subtracted from your rewards balance. That includes any bonus rewards you may have earned.
Let’s say you bought a TV at Walmart with your Chase Freedom Flex℠ in late December 2020, when Walmart was a quarterly bonus category on the card. You earned 5% cash back for the purchase instead of the usual 1%. Now say it's a couple weeks later, in January 2021, and you return the TV. All the cash back you earned from the purchase will be subtracted from your rewards balance — the whole 5%, even though Walmart is no longer a 5% category.
The credit for your refund will probably appear on your credit card account within days, but you might not see the rewards disappear immediately. It might not happen until your monthly statement closes.
Many credit card issuers now have targeted offers that can be added to your card like a coupon, where you get an automatic statement credit for spending a certain amount at a specific retailer. If you’ve taken advantage of one of these deals, such as a Chase Offer or Amex Offer, that statement credit will likely be reversed when you refund the purchase. That's on top of losing the rewards you earned for the purchase itself.
One way to keep your rewards
There is one way you can hold onto the rewards you earned for a purchase even after making a return: Get store credit rather than having a refund applied to your card. As far as your issuer is concerned, the money is still being spent at that retailer, so the rewards are yours to keep.
Of course, your money will then be tied up at that store. If it's a place where you shop regularly, you'll have plenty of opportunities to make use of the store credit. If not, you probably won't want to be stuck with credit there instead of getting your money back to use elsewhere. In that case, it makes sense to let go of the rewards.
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When a refund can be devastating
Having rewards disappear because of a refund can be a bummer. But if a refund causes you to drop below the spending requirement for a big sign-up bonus, it can be downright disastrous.
Let’s say you get a new Chase Sapphire Preferred® Card, which offers this bonus for new cardholders: Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 when you redeem through Chase Ultimate Rewards®. Plus earn up to $50 in statement credits towards grocery store purchases. You put all your spending on the card to hit the requirement, and you get it in just under the wire.
Then, you decide to return a couple pairs of jeans you bought on a whim. The $100 refund hits your credit card, and when the statement closes, you’re $100 short of the required amount, so you don't get a bonus.
Perhaps worse, a bonus could even be revoked after it’s awarded. If you meet the spending requirements on the new credit card and claim the bonus, but later return a purchase that put you over the top, the issuer can take back the bonus points you’ve been awarded. If you’ve already redeemed the points, you’ll see a negative points balance on your statement. All the rewards you earn on the card would go toward "paying back" the bonus, and it could be a long while before you're back in the black.
Talk about a bummer.