How Do Credit Card Refunds Work?
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When you're unsatisfied with a purchase, a merchant's policy will determine whether you get a refund, store credit, or you remain stuck with the unwanted item or service.
But if you paid with a credit card, you may be able to rely on some consumer protections, especially if the merchant refuses to return your money.
Here’s a more in-depth look at how credit card refunds work.
What happens when you get a credit card refund?
On a purchase made with a credit card, a merchant may have different options for making it right, including giving you store credit, physical cash back or a statement credit. If it's a statement credit, the purchase is effectively "erased" from your credit card account. The merchant refunds the purchase amount back to your credit card issuer, and the card issuer then credits your account for the returned amount, removing it from your statement balance.
Depending on the merchant’s return policy, you may have to meet certain requirements to get a refund. For instance, an in-store purchase may require proof of purchase in the form of a receipt or the credit card used in the transaction. Online refunds may also require a receipt when you ship an item back. If you’re seeking a refund on a service instead of a product, the process may be easier because there isn't a physical product involved. You can likely contact the service provider over the phone or on its website to get your money back.
Note that you'll have to continue making any necessary credit card payments while a refund is pending, and you'll forfeit any credit card rewards earned on the purchase.
If you pay off your full credit card balance while a refund is pending, the amount credited may post and cause a negative balance to appear on the credit card statement. This may look alarming, but the negative balance is actually a credit to your account for the amount you overpaid. It’s your “money,” in statement credit form. You can spend it without having to pay it back.
How long does it take to get a credit card refund?
The time it takes for a refund to appear on your credit card statement will vary by issuer. If you're returning an item in a store or contacting customer service about a refund on a service, you might expect the refund to process in a matter of days.
For online orders that you’re shipping back, the process may take weeks as opposed to days. During that time, you should continue making credit card payments by the required due date.
What can you do if the merchant won’t provide a refund?
If the merchant is unwilling to refund you for a product or service, you may have other options. Some credit cards offer return protection, which extends the amount of time allowed for returns or exchanges.
For defective products, another option might be to dispute the charge with your credit card company, though it may take longer to resolve this way. In these cases, your credit card issuer will have to review your claim and any accompanying evidence to determine whether the charge is reversible. A reversal of a charge is known as a chargeback, and it’s different from a refund because the action is taken by the credit card company and not the merchant.
Generally, before you can initiate such a dispute, you must have made an effort to make things right with the merchant first. You also may be able to dispute a transaction only if it meets certain requirements, including:
The purchase was made in your home state or within 100 miles of your home address.
The price of the service or product is more than $50.
You haven’t fully paid for the product or service.
Who covers the purchase while the refund is pending?
You're responsible for covering the cost of the purchase while a refund is pending, meaning you’ll still need to make at least the minimum payment on your credit card if that bill comes due as you're waiting for resolution. By keeping up with payments, you’ll avoid late fees and a potential penalty APR.
Late fees can run as high as $41, according to the Consumer Financial Protection Bureau’s website. Your money is already tied up in the refunded purchase, so it’s worth keeping up with payments to avoid further disappointment in the form of fees.
What happens to rewards earned from the purchase?
Rewards earned on the refunded purchase will be lost. Redeeming rewards before making a return may result in a negative rewards balance on the account. This means that you owe rewards back to the issuer. In those cases, any points, miles or cash back that you normally would have accrued from future purchases will instead be put toward your negative reward balance until you've "paid it back," at which point you'll start earning rewards again. The process may vary by issuer.
To keep your rewards, you can consider store credit instead of a statement credit, if that's an option. But don't let rewards steer the outcome. If you’ll receive more value by getting the money back, it’s not worth choosing store credit.
One exception may be if the credit card has a valuable offer like a sign-up bonus that requires you to have spent a certain amount of money within a specified time frame. If a refund could get in the way of meeting that requirement, you may want to do some math to determine the right move.
Does getting a refund on a credit card hurt your credit?
Getting a credit card refund will not have a negative impact on credit scores. Refunds are not included among the key factors that go into calculating your credit scores.
In fact, because the amount of available credit that you have in use (known as your credit utilization ratio) is one of those factors, it's possible that a large refund could actually help build your credit scores by freeing up more available credit.
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