How do credit card refunds work?

Whether the jacket you loved in the store looks weird at home or the gift you bought is no longer needed, you’re bound to find yourself returning an item you’ve purchased.

If you’ve purchased your item with cash, you can expect the cashier to hand you back the same amount of cash you paid for the item. But how do credit card refunds work?

Here’s what you need to know about credit card refunds.

What is a credit card refund?

When you return an item, the merchant typically issues your refund as either a store credit or in the form of your original payment method, depending on their return policy. If you’re receiving your refund to the original form of payment and you paid with a credit card, you’ll receive a refund to your credit card account.

Related: The best credit cards for online shopping

Can you get a refund on a credit card?

If the merchant allows a refund to your original payment method, you’ll get a refund on the credit card you used to make the purchase. Even if the merchant terms prevent you from receiving a refund, you may still be able to get a credit card refund if your card has return protection.

For instance, if you paid with The Platinum Card® from American Express, its return protection* allows you to receive a credit card refund of up to $300 on an eligible item within 90 days of purchase if the merchant won’t take the item back.

*Eligibility and benefit levels vary by card. Terms, conditions and limitations apply. Visit americanexpress.com/benefitsguide for details.

Related: Your guide to shopping protections on American Express cards

How do credit card refunds work?

When you make a purchase with your credit card, you allow the credit card company to pay for your purchase, and you pay them back when you pay your statement balance.

When you make a return, the credit technically goes to the credit card issuer, and your balance is adjusted when your credit card refund is processed.

Here, my account shows the purchases I’ve made (the positive numbers) and a return that has been processed and deducted from my account balance.

However, if your payment is due before the refund is processed, you are responsible for paying the purchase amount. Your balance will then be adjusted for the following billing cycle once the return is processed.

Related: Do refunds count against spending toward a sign-up bonus?

How long does a credit card refund take?

Credit card refunds can take anywhere from a day to a few weeks, depending on the merchant and your credit card company. If you have a significant return that you want to clear before your payment is due, make the return as early as possible.

Ideally, allow at least five business days between your return date and the end of your billing cycle to increase the chances that your credit card refund will be processed before your payment is due.

Related: What to do if you have a negative balance on your credit card

What happens to my credit card rewards when I get a refund?

Unfortunately, you lose the rewards you earned on a purchase when you return it. Like your account balance, your rewards balance will be adjusted when your return is processed.

Similar to my account balance, my rewards balance shows the returned purchase points deducted from my rewards account.

If you want to keep your rewards, you can request the merchant give you a store credit rather than a refund.

Related: What are points and miles worth?

Bottom line

When you return something you purchased with your credit card, the purchase amount is subtracted from your credit card balance. A credit card refund can take a few days or even weeks to be processed, though, and you’ll be on the hook for the purchase amount if your payment is due before a return is finished processing.

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