How Do Credit Card Refunds Work?

Making purchases with a credit card can be extremely convenient — until you’re looking to receive a refund. 

While the credit card refund process itself is typically straightforward, it could mean waiting several days for your account to be credited, losing any rewards you earned from the purchase and still being liable for any potential associated fees.  

Below, CNBC Select explains how credit card refunds work and some considerations you need to keep in mind.  

After buying something with a credit card, you may realize at some point that you’re no longer satisfied with the purchase and want to request a refund. How you receive a refund on a credit card purchase typically depends on the merchant’s return policy. When returning an item, a merchant may offer store credit, money back or, in the case of “final sale” items, no refund at all.

When requesting money back, the merchant will generally credit the refund to your original form of payment, so if you paid by card, you won’t receive physical cash back. Your credit card issuer will then post a statement credit to your account, effectively reducing your statement balance by the refunded amount. 

Credit card refunds don’t directly impact your credit score, but if you receive a credit that significantly reduces your credit utilization rate to under 30%, it could boost your score. 

A credit card refund can take several days to process since it has to go through the credit card networks. Depending on your credit card issuer and the merchant, the refund process generally ranges between five to 14 business days. That process can take a bit longer if you first need to ship an item back to a merchant.

If you see that the refund may appear on your card after your payment due date, you should make sure you have enough funds to cover the purchase to avoid any late fees.

The process of a credit card refund differs from a debit card refund since credit cards typically do not allow cash refunds. This is because when you make a purchase with a credit card, your credit card issuer pays for the purchase and then you pay the issuer back when you make payments to your account. That means the merchant needs to issue a refund to your credit card issuer before it can be credited to your account and that refund can only be received through the original payment method. This is also the reason why credit card refunds can take longer than cash or debit card refunds.

Although credit card refunds are generally straightforward, they may come with some disadvantages.  

You could lose your rewards 

Once you receive your credit card refund, any points, miles, cash back or other rewards earned will be deducted from your account. Depending on the credit card issuer, if a refund pushes you below the spending requirement for a welcome bonus that you earned, the bonus may be rescinded.

Losing a welcome bonus could be quite costly. For example, the Chase Sapphire Preferred® Card is currently offering a bonus of 60,000 bonus points after spending $4,000 on purchases in the first three months from account opening. That’s worth $750 toward travel when you redeem through Chase Ultimate Rewards® or more when redeeming points through Chase’s transfer partners.

However, you may be able to keep your rewards by asking the merchant to refund you with store credit instead of a credit card refund. Just note that if you do this, you’ll still be responsible for paying back the balance on your credit card account.

You could be stuck with any associated fees

If you’ve made an international purchase, credit card issuers may not refund any foreign transaction fees because it costs them money to process the transaction. That means depending on your credit card’s policy, you could be stuck with having to pay the fees, so be sure to check with your credit card issuer.

Many credit cards also don’t charge foreign transaction fees, making it easier to make any purchases while abroad. CNBC Select ranked the Capital One Venture Rewards Credit Card as a top card without foreign transaction fees due to its low annual fee and straightforward rewards structure.

If a merchant denies your refund request, you may be able to tap into your credit card return protection benefit, which effectively extends an eligible item’s return policy. The Chase Sapphire Reserve®, for example, offers up to $500 in return protection coverage per eligible item, up to $1,000 per year. The coverage applies to eligible items in like-new or good working condition bought in the last 90 days, whether you paid in cash or with Chase Ultimate Rewards points.

You could also try to dispute the charge with your credit card issuer if, for example, your package was never delivered or if you suspect a fraudulent charge on your account. The issuer will then investigate the dispute and refund you the full amount if your claim is valid. Many credit card issuers also offer $0 liability on unauthorized charges, such as the Citi® Double Cash Card and Blue Cash Preferred® Card from American Express.

Alternatively, you may be covered by purchase protection, which covers damage, loss or theft of recently purchased items.

Although credit card refunds are mostly beneficial, they can also mean losing any rewards earned on your credit card purchase or being liable for any foreign transaction fees. However, there are cards like the Capital One Venture Rewards Credit Card that can help avoid such fees.

Just remember that a credit card refund solely depends on the merchant’s policy. If a merchant refuses to issue a refund, you’ll need to turn to your credit card’s return protection policy (if it’s offered) or dispute the charge with your credit card issuer for a chargeback. Credit card refunds can also take several days to process before it appears on your account so make sure you’re able to cover the purchase you’re fully refunded.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every credit card guide is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of credit card products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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