How credit card refunds work – Forbes Advisor
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Some things are not meant to be. If you made a purchase on plastic that doesn’t work, you may be able to get a credit card refund. A refund issued to a credit card means that the cost of the returned product will be credited to the associated account. Depending on whether the purchase was returned in person or online, receiving a credit card refund for a returned item may take as little as a few business days or up to six weeks.
How credit card purchases work
A credit card issuer sets a credit limit for each cardholder. The credit limit basically acts as a maximum loan amount. Whether the credit limit is $ 500 or $ 50,000, the cardholder cannot spend more than their credit limit without paying off the balance. A balance is the amount owed to the credit card issuer at the end of a monthly billing cycle.
When a credit card holder purchases an item from a retailer, the merchant requests money from the card issuer rather than the card holder directly. The card issuer pays the merchant the purchase amount electronically and adds the charge to the cardholder’s balance. The card holder is then responsible for paying the amount invoiced to the issuer. Making purchases with a credit card is useful for several reasons: to earn points or rewards, to ensure the ability to dispute charges and not be held financially responsible, or to obtain additional purchase protection when it is. available in accordance with the card contract.
How are refunds issued
Requesting a refund from the retailer for a returned item works in reverse to the original purchase charge. The cardholder returns an item to the merchant (or returns it in person) and the merchant refunds the purchase amount to the card issuer. Most retailers do not allow a cash refund if the purchase was made with a credit card (this may be possible for debit card purchases, but not always).
Any purchase that earned points or rewards for the cardholder will have those winnings deducted from the rewards balance once the issuer credits the purchase to the cardholder’s account. If the cardholder uses an entire rewards balance before processing a refund, then a negative rewards balance may exist in an account.
Refund processing time
The time it takes to process a refund depends on the policies of the retailer and card issuer as well as the cardholder’s method of return. Returns made in person will generally be processed faster than an item returned to a seller. Some retailers like Amazon claim that a refund will be credited to the cardholder’s account within three to five business days of processing the return. However, the returned item is not processed until Amazon (or the seller) receives the item by courier. It is always a good idea to read the retailer’s return policy on their website before anything is sent back to the store.
After the merchant processes a return, the issuer may take seven to ten business days for the purchased amount to be credited to the cardholder’s account. If you are shipping an item, wait one to two billing cycles before a credit appears on an account.
The item has been returned. Now what?
While waiting for a credit card refund to be credited to an account, it is important to continue paying the balance before the end of each billing cycle to avoid interest charges. Cardholders are still responsible for adding the purchase to a balance until the refund is processed. Credit cards typically have high annual percentage rates (APRs) that could cause the cardholder to pay significantly more for an item than originally intended. Avoid paying extra by paying off the balance each month.
Use the card issuer’s online portal to periodically check negative credit on the credit card account. While “negative” has a bad connotation, in this case a negative balance is a good thing to find on a bank statement – it means a reduction in the amount owed. A credit card refund will be treated as a negative credit deducted from an existing outstanding balance. If the balance is zero, the online account statement will show a negative balance.
What to do with a negative account balance
Having a negative balance on a credit card account means that a cardholder has additional credit that is not owed to the card issuer at that time. A negative balance can occur when a cardholder pays the entire balance before a refund is processed. The negative balance will be applied to all future charges until it is exhausted, effectively serving as a prepaid balance.
If the cardholder has a large negative balance, for example greater than $ 1,000, they are entitled to request a refund by check, direct deposit or money order. Federal law requires the card issuer to at least attempt to reimburse the cardholder appropriately upon request.
At the end of the line
Using a credit card to make purchases (especially large ones) can be beneficial for earning rewards, additional purchase protection, and potentially contentious fees. Requesting a refund from a retailer should be a fairly straightforward process that can take up to two billing cycles to show up on a credit card account. While the process may take longer than expected, it should be relatively painless for the cardholder. Make sure to avoid making large purchases that cannot be refunded while waiting for a refund.