How do credit card refunds work?

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Published on October 14, 2024 | 8 min read

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Key takeaways

Credit card refunds allow you to get money back for a purchase made with your credit card, usually in the form of a credit to your account.
Refunds can take five to 14 business days to process and may not be given in cash.
It's important to understand refund policies before making a purchase and to be aware of your rights, such as activating purchase or return protection.

No matter how careful you are with credit card spending, mistakes and mishaps can still happen. You could purchase something that turns out to be defective, for example — or simply change your mind about the item you just bought. That’s why credit card issuers allow you to request credit card refunds. When you return an item purchased with a credit card, the merchant begins a process that allows the amount of your purchase to be refunded to your credit card balance. Since your refund has to go through a credit card processing service before it can be applied to your account, it may take a while for the transaction to complete. Credit card refunds are just one of the many protections that come with credit cards. However, not all aspects of credit card refunds work in your favor. You may still end up paying interest and fees on the amount of your purchase, for example, and you’ll probably lose any rewards you’ve earned.

What is a credit card refund — and how does it work?

A credit card refund allows you to get your money back on a purchase you made with your credit card. But how do refunds work on credit cards, exactly? In most cases, you’ll receive a credit on your account that’s equal to the amount of the original purchase. Retailers like Amazon offer you the choice of applying the amount of the refund toward your credit card account or toward a future purchase with the site. When you make a purchase with a credit card, your credit card company pays the retailer or merchant directly. The purchase amount is deducted from the available credit on your account after your card issuer completes the transaction. You will then pay your credit card issuer back for the purchase when you make payments to your account. When you request a credit card refund, the merchant or retailer sends the refund to your credit card issuer first. Your credit card issuer then applies the refund to your statement or balance as a credit. Can you get a credit card refund in cash? Not likely — a cash refund could be considered a cash advance, so don’t expect a cash refund on credit card purchases.

How long does a credit card refund take?

A credit card refund can take between five and 14 business days to appear on your card statement or balance. This is because the transaction goes through a credit card processing service and must be completed before your issuer can credit your account for the purchase. However, the exact time can vary depending on your return method, the card issuer and the merchant. If you return an item in person, some merchants can credit your account more quickly. If you mail your return, you may have to take shipping time into account. The best way to determine how long a refund might take is to find more information on the merchant’s website. Amazon, for example, advises customers to expect credit card refunds within five business days after the refund is issued. If you prefer an immediate refund on your purchase, many retailers are willing to offer store credit on returned items. Some online retailers offer store credit, giving you the opportunity to put the value of your refund toward another purchase. In this case, the original purchase will remain on your credit card balance, so you’ll want to pay off your balance as quickly as possible to avoid unnecessary interest.

Credit card vs. debit card refunds

If you return a purchase made with a debit card, the amount of the purchase can be credited to your linked checking account as a debit card refund, or you can sometimes receive cash back if you return an item in-store. However, many people prefer to make purchases on credit cards due to the increased protections credit cards offer. Credit cards are generally safer than debit cards because of the fraud and theft protection benefits credit cards offer, especially when shopping online. If you’re making more purchases on debit than credit, keep in mind that you can put those same purchases on credit and pay them off in full every month. And if you don’t like the idea of waiting until the end of your billing cycle to pay off an entire month’s worth of spending, you can usually make multiple monthly payments on your account without penalty. Today’s best credit cards are designed to work with you to build good credit, protect your purchases and allow you to shop safely online. Plus, you’ll have more opportunities to earn credit card rewards.

What to do if a merchant refuses to refund a charge

Most merchants are familiar with the credit card refund process and will have no problem allowing you to request a credit card refund. If the merchant refuses or is unable to complete the process, you may be able to rely on credit card return protection instead. Credit card return protection allows you to request a credit card refund even if the retailer does not allow returns on purchases. You may also be able to activate credit card purchase protection if your item was damaged or stolen before you had the chance to use it. Check with your credit card issuer to determine whether your situation meets the requirements to enact these protection policies. In some cases, a merchant may refuse to accept a returned item. Many sale items, for example, are sold as-is, with no refunds permitted. That’s why it’s important to understand a merchant’s refund policy before making a purchase — and if you’re purchasing a sale item in a brick-and-mortar store, you may want to examine it carefully before deciding whether to buy. In other cases, however, a merchant may fraudulently sell you an item you weren’t expecting to receive — or allow you to order an item that doesn’t exist and will never arrive. These types of online shopping scams often originate through Instagram, Facebook or TikTok ads and can generally be avoided by shopping with reputable merchants and brands.

Keep in mind: If you make a purchase that turns out to be fraudulent, you have rights. This includes the right to request a credit card chargeback, which allows you to work with your credit card issuer to get the cost of the purchase refunded to your account.

The difference between a refund and a chargeback

Refund	Chargeback
Refunds are initiated by a merchant after you return an item that was legitimately purchased.	Chargebacks are initiated by your credit card company after you file a billing dispute over a purchase you never received or an item that was fundamentally different from what you believed you were ordering. You can also file a credit card chargeback on an item charged to your account by an unknown person, which is another common form of credit card fraud.
Refunds often take five to 14 business days to process.	A chargeback can take longer to process because your card company has 90 days to resolve the issue and up to 150 days to complete the charge reverse process. In some cases, your credit card issuer will offer a temporary credit to your account while they complete the chargeback process — but if the chargeback request is determined to be invalid, the credit will be removed.

The Fair Credit Billing Act gives you 60 days to dispute a credit card charge. This gives you enough time to ensure that you aren’t accidentally disputing a valid charge, such as a charge for an item that simply got delayed in shipping. (If you initiate the chargeback process and then realize you made a mistake, contact your credit card issuer immediately.)

The bottom line

Refunding any of your purchases to your credit account doesn’t need to be a hassle, even for big-ticket items. Credit card refunds are easy to request, and most reputable merchants will be familiar with the refund process. In most cases, a credit card refund will be fully processed within two weeks — but you may end up paying interest charges or fees on the purchase, and you won’t be able to keep any rewards you might have earned. If you are searching for a new credit card, make sure to take a look at the terms, benefits and protections the card offers. While credit card issuers will refund the cost of a returned item to your account, a card that offers return protection and purchase protection can provide even more security and peace of mind. You’ll also want to be aware of which credit card issuers provide the best customer service, especially if you need to request a credit card chargeback or minimize the effects of credit card fraud.

FAQ

A credit card refund doesn’t directly impact your credit score, but requesting a refund may give you a boost if the refunded amount reduces your credit utilization ratio. Using 30 percent or less of your total credit limit can help you build and maintain good credit — and while you shouldn’t necessarily return items just to improve your credit score, you may see a slight score increase after the refund process is complete.
Unfortunately, any credit card rewards you earned on a purchase that was subsequently returned will likely disappear from your account after the credit card refund is processed. If your credit card refund takes you below the minimum spending amount required to earn a welcome bonus, your credit card issuer may also withdraw the points, miles or cash back associated with the bonus.This policy was put in place to prevent people from taking advantage of the system — otherwise, people could make purchases and return items simply to rack up rewards. If you’d like to keep the rewards you earned from an item you return, you can always ask the merchant to refund you in the form of store credit instead of applying the refund toward your credit card balance.
Money refunded to your account is not considered a payment or a partial payment toward your credit card — which means you’ll still need to make at least the minimum payment on your balance when it comes due. You may also need to keep an eye on your credit card interest since any interest you may have accrued on the purchase is unlikely to be refunded. If you are still within your credit card’s grace period, you may be able to avoid interest by paying off your statement balance in full.
If the purchase amount of the item you are returning is the only balance on your account, then your balance will return to zero after the refund is processed. If you have paid your card down to a zero balance before receiving your refund, you will have a negative balance on your credit account — and any future purchases will be applied to the negative balance first.