When a purchase is refunded to a credit card, the refund amount is processed as a deduction from the balance on the card.
If the card has no outstanding balance, the refund is still processed.
The amount of the refund subtracts from the zero amount owed, taking the credit limit into a negative balance status.
Unlike negative funds in a checking account, a negative credit card balance is not derogatory.
How long does it take for a credit card refund to process?
Consumers are often advised a refund may take between 10 and 14 business days to be processed.
It is credited back to a cardholder account, but it often takes a far less amount of time.
Why do refunds take so long to process?
Although accomplished electronically, the whole process takes time due to a chain of moving parts, such as approval and processing by both card issuer and merchant.
As a result, refunds to credit cards are not instantaneous and can span several days until the cardholder sees the completed refund.
When a customer wishes to return something they’ve purchased from a merchant, for example, the merchant accepts the item and processes the refund.
But the refund request is actually sent to the card issuer. The card issuer receives the request, approves and processes. It is at this point the amount is credited back to the cardholder.
If a card balance has been paid in full, including the amount to be refunded, the credit limit will be taken into a minus status when the refund is finally processed.
Do refunds count as credit card payments?
Most cardholder agreements do not allow refunds to count as payments. Unless the refund takes the account to a zero or negative balance, a monthly payment will still be required.
There are rare cardholder agreements that allow a refund to stand in for a monthly payment if the refund amount is equal or greater than the payment due.
What happens to credit card points when you return something?
Reward programs associated with your credit card will deduct points previously awarded on the returned purchase.
This is because the rewards are strictly linked to the amount charged to a credit card and a refund lessens this amount.
Does returning items affect credit score?
Simply returning items and receiving a refund does not affect your credit score since it does not factor into the credit score calculation.
In the same way, a refund to a zero balance credit card does not impact credit score negatively or positively either.
However, depending on the amount being refunded, the balance on your account may influence your overall credit utilization positively, which does impact credit score.
This may be particularly handy if the refund occurs just before the creditor reports to the bureaus, shining a more positive light on your credit usage.
Generally though, most refunds involve relatively small amounts of money, which typically do not impact your credit usage terribly much.
Do you pay interest on refunds?
Accrued interest on a purchase is adjusted to reflect the refund.
It is important to verify the cardholder agreement because interest accrual calculations vary.
Does negative balance increase credit limit?
Because the credit limit is in a minus status, there is temporarily more credit available. When the cardholder makes additional purchases, the negative balance will eventually disappear.
While it may seem like there has been a credit increase, the situation merely reflects the cardholder has paid ahead for any future purchases.
Can I get a refund in cash instead of a negative balance on my credit card?
Cardholder agreements differ, so it is important to verify what is allowed. Some card agreements allow cardholders to request a check or have the amount wired to a bank account.
Can I access the negative balance as a cash advance?
It is important to refer to the cardholder agreement. If allowed, taking the funds as a cash advance may incur cash advance fees and immediate interest accrual on any balance over zero.
Can I use the negative balance to make a payment on another credit card (as a cash advance)?
This is an unusual request and the cardholder should refer to the account agreement.
This may be possible by separating it into two transactions. The first transaction would be the cash advance (if allowed) for the negative balance. The second transaction would be applying the funds to the other credit card as payment.
Creditors do not allow using credit from one card to pay another. It is a transfer of debt and not actually paying down a balance. Attempting to do so is considered an indication of financial difficulties and may be refused.
Can a refund be processed to a different card than the one used for the original purchase?
A refund cannot be processed on a different credit account, it is not the merchant that makes a refund to a credit card. It is the card issuer that refunds the amount after being notified by the merchant.
Best business practices as well as fraud prevention make it reasonable to expect businesses to limit refunds to the cards used for the original purchase.
These are the same reasons as to why merchants deny cash refunds for credit card purchases, and that is, there’s too much financial liability and potential for fraud.