How do refunds to credit cards work


How do refunds to credit cards work

I cannot understand this: if I make an online purchase with a credit card, the purchase is done instantly, and I receive a SMS notification within 5 seconds. However, if money is returned to the credit card (e.g. cancelled ticket / deposit refund), it takes 2 to 4 weeks.

A refund is simply a transaction in the reverse direction. Given that everything is processed electronically nowadays, why does it take so long before the refund is shown on my account?

It's not usually apparent to the average consumer, but there's actually two stages to collecting a payment, and two ways to undo it. The particular combination that occurs may lead to long refund times, on top of any human delays (like Ben Miller's answer addresses).

When you pay with a credit card, it is typically only authorized - the issuing bank says "I'm setting this money aside for this transaction", but no money actually changes hands. You'll typically see this on your statement as a "pending" charge. Only later, in a process called "settlement", does your bank actually send money to the merchant's bank. Typically, this process starts the same day that the authorization happens (at close of business), but it may take a few days to complete. In the case of an ecommerce transaction, the merchant may not be allowed to start it until they ship whatever you ordered.

On the flip side, a given transaction can be voided off or money can be sent back to your card. In the first case, the transaction will just disappear altogether; in the second, it may disappear or you may see both the payment and the refund on your statement. Voids can be as fast as an authorization, but once a transaction has started settlement, it can't be voided any more. Sending money back (a "refund") goes through the same settlement process as above, and can take just as long.

So, to specifically apply that to your question: You get the SMS when the transaction is authorized, even though no money has yet moved. The refund money won't show up until several days after someone indicates that it should happen, and there's no "reverse authorize" operation to let you or your bank know that it's coming.

How long does a credit card refund take?


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Let’s say you’ve purchased a new pair of jeans with your credit card.

You think they’re going to look great on you. Once you get home or once your purchase arrives, however, you’re not so in love with the jeans after all. You decide to return them and get a refund.

How soon you get that refund depends on several factors. These include whether you bought the jeans in a store or online, how you return them, and your credit card company’s refund policies.

What’s the average time for a credit card refund?

StellaService, a company that helps businesses improve customer service, conducted a study between July 2013 and June 2014 (the most recent data available from them) to find out the average time for a credit card refund to be processed, starting from when the return was shipped to when a refund was posted on a credit card statement.

Out of 5,000 online purchases from 138 retailers, StellaService found the average time for a credit card refund was 15.8 days. Hewlett-Packard and had the shortest time for a refund at 6.3 days.

“The timetable for a credit card refund depends on the policies and procedures of both the seller and your issuing [credit card company],” says Monica Eaton-Cardone, co-founder and chief operating officer of, a company that helps merchants manage credit card disputes.

Read on to find more examples of refund policies for several merchants, and to learn the difference between billing disputes and fraud disputes.

Will a credit card issuer ever just wipe out a disputed charge?

Sometimes. If the disputed amount is small — say $25 — the credit card issuer may simply eat that money to avoid the costs associated with handling your dispute.

Credit card refund policies vary by merchant

A review of credit card refund policies for a number of merchants, payment processors and card issuers shows that there’s no consistency around the time that it’ll take for a refund to show up in your credit card account.

Below are examples of refund policies that we found online. Keep in mind that both the merchant and the credit card issuer are involved in the process. This means that each will need time to work on your refund.

PayPal — an online payment service that lets you send or receive payments — says refunds to a credit card can take up to 30 days, depending on the credit card company involved.

Square, another online payment service, says it can take two to seven business days to process a refund. Then it can take another two to seven business days — depending on the card issuer’s refund-processing speed — for the refund to show up in your account.

This retailer says a credit card refund takes an average of seven days. Kohl’s notes the processing time can vary based on the issuer of your credit card.

Home Depot, the home-improvement retailer, says if you return an item to one of its stores, your account will be credited at the time of the return.

But if you send back an item by mail, your account will be credited once the item is processed at the retailer’s warehouse.

After returning an item to a store or by mail, it may take two to 10 business days for the refund to appear in your account, Home Depot says.

Billing disputes can make a refund take longer

If you’re not returning an item, but instead are disputing an error on your credit card statement, the time it takes to receive a refund may be longer.

The Fair Credit Billing Act (FCBA) gives you ammunition to fight billing errors. Among the errors covered by the law are charges that list the wrong amount or date, transactions involving goods or services that you never got, and transactions involving merchants that didn’t deliver goods or services in the way they were promised.

To take advantage of the law’s consumer protections, the creditor responsible for the error must receive a dispute letter from you within 60 days after the bill with the error was mailed to you.

By law, the credit card issuer must acknowledge your complaint in writing within 30 days after receiving it, unless the problem already has been resolved, according to the Federal Trade Commission.

The issuer must resolve the dispute within two billing cycles — but not over 90 days — after getting your complaint.

So, under this scenario, it could take a maximum of six months for a refund of a disputed charge to be posted to your credit card account.

Hmm … That seems like a long time.

It may not take nearly that long, though. For instance, card issuer American Express says most disputes are resolved within a month, although complicated cases could last longer.

You may be able to avoid a long wait if you approach the merchant about a potential error, according to Bank of America.

For instance, if the merchant mistakenly swiped your card twice, resulting in two charges, you can show the merchant your receipt and credit card statement. If it was an online transaction, you can call or email the merchant and submit copies of related documents.

In many cases, according to Bank of America, a merchant can cancel or reverse a charge without involving a credit card issuer. But if that’s not possible, then you’ll need to contact the issuer of your card.

A refund for a fraud dispute is similar to a billing dispute

If you’re seeking a credit card refund related to fraud (for example, someone steals your card and uses it to make unauthorized charges), the refund may show up in your account right after you’ve reported it or it could take weeks or months for that to happen.

For instance, card issuer Discover says it can take up to 90 days to wrap up.

Just as with any other credit card dispute, you must lodge a complaint about suspected fraud within 60 days of your statement being sent to you in order to take advantage of the FCBA’s consumer protections.

However, Bank of America recommends contacting the credit card issuer immediately if you think your card was stolen or used to make unauthorized purchases.

“Some disputes can be addressed over the phone, while others require an exchange of emails with the company until it completes its investigation. If you choose to dispute the charge over the phone, follow it up with a letter to the credit card company,” according to, which helps people resolve debt problems.

It might take persistence and patience to secure a refund for a charge on your credit card. But don’t give up. After all, it’s your money.

Keep in mind there’s no set amount of time it’ll take to get the refund. You can stay on top of the refund process by checking your credit card account online or calling the card issuer.


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What Happens To My Credit Card Bill When I Make A Return?

Jun 27, 2016 | Updated Dec 06, 2017

Credit Card Returns Are Pretty Simple

Are you suffering from buyer’s remorse because of some recent purchases you’ve made? Do you want to know how to cure it? Drive back to the mall and return some things.

As long as you’ve complied with the retailer’s return policy, when you return the item the retailer will generally issue a refund equal to the cost of the original purchase, whether you paid with cash or credit.

Here’s the quick version of what happens with your credit card when you make a return:

  1. The retailer issues a refund to your credit card account
  2. A credit for the refunded purchase will appear on your credit card transactions, usually up to one week later
  3. Cash back or points earned on the purchase are reversed

Keep reading to learn more about the process of making returns on purchases made with credit cards.

Where Does The Money Actually Go?

When you buy something with a credit card, the retailer is actually starting the process of being paid by the credit card issuer, not by the consumer who is making the purchase. Normally, once the transaction is approved your amount of available credit is reduced, and you’ll be billed by the credit card company later.

At this point, whether you actually ever pay off your balance isn’t the retailer’s problem because they’ve already been paid. In the event that an item purchased with a credit card is returned, the retailer will issue a refund to your credit card account instead of issuing funds directly to you.

Remember, the merchant is actually paid by the credit card issuer during a credit card transaction and not by the consumer. This is why a consumer can’t receive a cash refund for a purchase that was originally made with a credit card.

A refund for a returned item will not usually post to your credit card account instantly.

Instead it generally takes several business days and potentially even up to a week before a refunded purchase will appear on your credit card ledger. Generally when a refund is processed for a returned item within the same credit card billing cycle, you won’t be held responsible to make a payment on that specific charge.

If you were to return a purchase near or after the end of your billing cycle, then the refund for the transaction might not show on your account before your next payment is due. Regardless of the timing of the purchase and the return, if you fail to make at least the minimum payment on your account prior to the due date then you could be penalized by your credit card company in the form of a late fee. You can’t skip making a minimum payment if there is any amount due to the card issuer.

Consumers do not always return an item immediately or even within the same billing cycle. Sometimes it’s not even close. Months may pass between the date of the original purchase and the return of an item.

If there is a balance on your credit card when a refund for a purchase from a previous billing cycle is issued, then the credit will simply be applied to your account, reducing your existing credit card balance.

If your credit card has a zero balance when the return is processed, a credit is generally added to the account that can be applied to future purchases. If your card remains inactive with a negative balance for several months, the credit card issuer will likely send you a check for the credited funds on the account. You can also call your credit card company to request that a check for the account credit be mailed to you, thus eliminating the wait.

If you made a purchase then carry a balance into another statement period you may be charged interest. When you make a return, that interest will not be refunded.

Rewards, Cash Back, and Signup Bonuses Are Returned Too

It’s worth noting that when a purchase is returned and a refund is credited to your credit card account, any reward points or cash back you may have earned on the original purchase will be lost as well.

Credit card issuers have policies to deduct previously earned reward points or cash back credit from your account in the event that a refund is issued. Otherwise, if the policy were different, there would undoubtedly be a large number of consumers attempting to game the system by piling up reward points for large purchases, only to return the purchases at a future date and keep the rewards. This will not work.

Sign up bonuses, commonly found on travel credit cards, generally follow this same rule. If you received a signup bonus based on purchases that you later return, you’ll likely also lose the signup bonus. Read the card agreement of your card to determine exactly how rewards will be handled with returns.

Returns for Transactions in A Foreign Currency

If you bought something in a foreign currency, and then you return it, what happens?

This is another area that can be complicated, and depends on the card agreement of your card, since it can vary from one card or issuer to another.

Many credit cards charge a foreign transaction fee. If your card does, it’s possible you won’t get that fee back when you make a return. If you’re in this situation where a foreign transaction fee is not refunded, you may be able to get it refunded by calling your credit card issuer and asking for a refund.

If a significant amount of time has passed since you made the purchase, the foreign currency may have gone up or down in value. Credit card companies usually use the current market value of the currency to determine how much is refunded when you make a return. That means you may lose or make money if the foreign currency has gone down or up in value since the original purchase.

Additionally, like many commodity markets, there is a spread for buying and selling currencies. That means it costs slightly more to buy a unit of currency than you would get for selling it at a given point in time. So, even if you make the purchase then immediately return it and your card doesn’t charge a foreign transaction fee, you may lose money.

Have any other questions about credit card returns that weren’t answered here? Hit the Ask button at the top of the page and ask away!

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I have a question about credits. I have credits on my account that were for charges in August that are shown on my September monthly statement. The credits make up a substantial amount of the bill. I called the bank to have the amount due for the September statement lowered to account of the credits. I figured this is fair since the bank has been fully reimbursed for the charges because the bank had received the credit from the merchant.

The bank told me that they would reduce the amount that was due for the September statement and that if I did not pay the full amount of the September statement (including the amount credited) I would be charge interest. Something seems very wrong about this. In essence, the bank is tell me that I will have to pay interest even though there is not longer a charge on the account.

Has anyone else faced this situation? There should be a rule against this.

I don’t fully understand what you’re asking.

1) When you say “credits on my account” are you talking about credits from returning items you previously purchased?

2) When you say “amount of the bill” are you talking about your total balance (total credit card debt) on the card, or are you just talking about a minimum payment that is due by your next due date?

Yes to question 1. For question 2, the “amount of the bill” I am referring to is the total balance on the statement, not just the minimum. Also, for the hypothetical below, assume that I am paying off my full balance every month.

For example, I purchase an item on August 15 for $100. My September 1 statement shows that charge. If I pay the full statement (including the $100 charge) by September 30 I will not owe any interest on the $100 purchase. On September 15 I return the $100 item and the merchant provides a $100 credit to the credit card company and my account.

In order to pay off the account in full on September 30 I believe that I should not have to pay the $100 charge since there is no longer a $100 debt. However, the bank is saying that I have to pay the charge as part of the September 30 statement (or they will charge me interest). Their explanation is that I will receive a credit against my October bill rather than the September bill.

Since they have been reimbursed for the $100 charge, it seems that they are expecting me to make a $100 interest free loan to them, which doesn’t seem fair.

I hope this makes sense. It seems simple in my head, but its hard to convey in writing for some reason.

It can vary from card to card, but really comes down to the terms of the cardholder agreement that you agree to when applying and later choosing to use the card.

Based on my experience, most cards work this way: If the purchase and return credit happened in the same statement period, you wouldn’t be expected to pay for the purchase and it wouldn’t be included in the balance when the statement is generated. However, if the statement with the purchase has already been generated and a return credit is issued some time in a later statement period, the statement that was generated, with its balance, still stand. Any later adjustments get reflected in the following statement.

I have Chase. Within my billing cycle, I purchased and returned an item for $100 in October. Both the purchase and return (credit) show up on my billing statement for October. However, per Chase, I’m expected to pay the $100 (statement balance) for that statement, despite the credit already showing up on my billing statement. I’m told the $100 credit from that return (it’s already posted in October and shows up on my billing statement) will be given to me in November.

Is this standard practice? I feel that I have bought and returned products within the same billing cycle before and never had to pay anything for them at the statement balance. Perhaps this is just for Chase?

I’m not sure what Chase’s standard practices are in regard to returns. It seems strange the statement balance would be $100 if the $100 purchase and $100 credit were both finalized before the statement closed. Perhaps the return was still pending when the statement closed?

Will the transaction of your refund be shown on your account, or will it just take away the fact you ever purchased that item?

Usually the original transaction will still be there and you’ll see the refund as a separate item.

Hello, I had a zero balance on my credit card. I made a purchase 10 days ago. 5 days ago I paid the balance off in full. today I returned the item. Having already paid the balance off….where does the refund go?

As this article says, “a credit is generally added to the account that can be applied to future purchases. If your card remains inactive with a negative balance for several months, the credit card issuer will likely send you a check for the credited funds on the account. You can also call your credit card company to request that a check for the account credit be mailed to you, thus eliminating the wait.”

Hello, I recently had a reoccurring payment process with my credit card company, it was my yearly Amazon Prime account, (Discover) and I already payed my monthly statement (I use their autopay).

I noticed this, since my credit score dropped for some reason, and requested them to change my payment from yearly to the monthly, and in doing so, they refunded me the funds from the yearly payment and charged me for the monthly payment price.

I understand that the refund will go back onto my card (not as a payment), but my question is; Will that refund make my credit score return BACK to what it was previously, after the next statement? Or is it already affected and I will have to rebuild the score?

Credit scoring models are complex and proprietary. I don’t have any way of knowing exactly what any of your credit scores will do if there is a refund on one of your credit cards. As long as you’re keeping utilization low and paying all your bills on time your credit should stay in pretty good shape. To learn more about building credit with credit cards read this:

hi I would like to ask if the customer requested for refund back to their credit card but that card is no longer available however the credit card company provided her new card. how this refund works since the original card is no longer valid? please answer.thanks

In that case the credit card issuer may credit the new account. The best way to find out would be to contact the credit card issuer.

hi, i have one question – will the refund affect the current due Amount (out of which the initial transaction happened for which refund is coming back, after return) ?

It’s likely the return will be reflected on your next statement. You may need to pay the full statement balance by the due date to avoid interest, or at least the minimum due that was on your statement by the statement due date to keep your account in good standing.

but why should i pay for the thing which i returned already. the refund should be deducted from the due amount statement right?

(i am sorry, i am just a newbie who got his 1st credit card)

Because you paid for it one statement period and returned it the next, it’s activity in the next statement period. If this all happened in one statement period then that would probably be reflected in the balance that’s due. It also depends on the terms you agreed to for your specific card when you applied. Generally if a statement period is closed and you have a refund in the next statement period it will be reflected on your next statement and doesn’t affect the statement period that has already closed.

my current statement period is active for 20 days, that means refund will be settled in that (if it comes before closing) and i will pay-n-avoid any bad reputation. (understood somewhat now)

thanks Mr Ganotis, appreciate your responses.

How Do Credit Cards Work? 7 Things You Need to Know

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If you’re not familiar with how credit cards work, they can be intimidating to use.

I put off getting a credit card for years because I didn’t understand them. Plus, I was afraid of getting into massive debt. In fact, a woman I once interviewed failed to understand just how do credit cards work — and racked up a $12,000 balance as a result.

But once you understand them, you see them for what they are: financial tools that you control. Credit cards can be invaluable for quickly building credit. However, if you’re not careful, it can be too easy to charge more than you can repay.

By understanding credit card basics, you will know how to responsibly spend with one — and always pay it off.

So how do credit cards work? Let’s start with the basics.

Credit cards – plastic cards that banks and financial institutions grant to cardholders – have information encoded in them that ties them to your credit card account. This information is used by merchants to process purchases and charge them to your credit card account.

2. What is a credit card account?

Your credit card is tied to a credit account — which is a borrowing tool and a form of debt. But unlike an installment loan, a credit card is a form of revolving credit.

This means that instead of borrowing all the money at once like you do with a loan, you borrow as you spend with a credit card. Every time you make a purchase with your credit card, you are doing it with the issuer’s money, not your own.

A credit card account will have a limit. This is the maximum amount the credit card company will let you borrow on the account.

3. What is a credit card balance?

Any transactions charged to a credit card are added to your credit card balance. This is the amount of money you’ve borrowed by charging purchases to your credit card but have yet to repay.

You add to your credit card balance every time you swipe your credit card, and you lower it every time you make a credit card payment.

However, try to limit your credit card balance to what you can repay each month in full. This is a good guideline to follow to keep your credit balance low and ensure you don’t borrow more than you can repay.

4. What is a minimum payment on a credit card?

The minimum payment is the amount you must pay each month to keep your credit card accounts in good standing. Your minimum payment will be due on your credit card due date each month.

A minimum payment is calculated based on your credit card balance. It is usually two to three percent of your credit card balance, or the outstanding interest you owe plus one percent of the balance. Most credit card issuers also have a flat amount that is the smallest they’ll charge on a credit card each month, typically $15 to $35.

The minimum payment on a credit card is small compared to your overall balance. It’s also recalculated each month. This means that the average credit card balance can take over a decade to repay with minimum payments alone — and you’ll pay hundreds in credit card interest during that time.

5. What is credit card interest?

Credit card interest, also called a credit card finance charge, is the cost you pay to have a balance. This is set by your credit card annual percentage rate (APR), which is the rate at which your balance accrues interest.

Figuring out how do credit cards work with interest can be complicated. But put simply, you will pay credit card interest on your average daily balance for the month.

You will usually have a 25-day grace period to repay a balance with your credit card issuer before it charges interest on the borrowed money. Pay off your credit card in full each month and you won’t pay credit card interest.

But if you charge, say, $100 this month and only pay $50 back, you’ll accrue interest on the remaining $50 until you repay it.

Therefore, you should always pay more than the credit card minimum to keep balances low. It will also help you avoid credit card interest and serious credit card debt.

An important part of understanding how do credit cards work is to know what your credit card is costing you.

All credit card costs, APRs, and fees will be outlined in your credit card agreement that you sign when opening a credit card. Carefully read this to ensure you understand your credit card.

Different credit cards will have their own fee schedules, and some will charge more while others will charge less ― or skip some credit card fees altogether.

The main fee you should worry about is the annual credit card fee, which you are charged each year simply for the privilege of having the credit card. Depending on your credit card, you could face an annual fee of $0 up to $500. A typical credit card fee is around $50 to $60 a year and will depend on the type of credit card you have.

Credit card companies will also charge other fees on certain transactions such as:

  • Balance transfer fees. These are charged when you use one credit card to pay off the balance on another credit card.
  • Cash advance fees. These are charged when you borrow from your line of credit in cash, rather than through a purchase.
  • Foreign transaction fees. You pay these for purchases made outside of your domestic country.
  • Late payment fees. You pay these if you make your credit card payment after your monthly due date.

7. What are the different types of credit cards?

There are various types of credit cards and some work differently than others. Here are some common types of credit cards, as well as what makes them stand out:

  • Rewards credit cards give cardholders rewards for making purchases on their credit card. Rewards can be cash back, or points that can be redeemed for travel purchases or other goods.
  • Secured credit cards require a deposit of cash that is used as collateral against the credit card balance. Because they are secured by the deposit, these cards are easier to qualify for. They can be a good option for consumers who want to rebuild credit.
  • Charge cards require borrowers to repay their balances in full every month. So the minimum payment is always equal to the monthly charges on the charge card.
  • Retail cards are credit cards that are issued by a retailer or store, rather than a credit card company or bank. These credit card accounts are with the store itself.

How do credit cards work? Simply, if you’re knowledgeable

At the end of the day, credit cards can be a tricky financial tool to use. Too many credit card users make credit card choices that hurt their finances and credit simply because they don’t understand them.

If you’re new to the world of credit cards, take your time learning about them and figuring out how does a credit card work. When you understand credit cards, you will know how to get the most benefit from them. And you’ll also avoid making disastrous credit mistakes simply because you didn’t know better.

How Do Cryptocurrency Refunds Work?

The rise of cryptocurrencies like Bitcoin is exploding, with more people than ever investing in this virtual currency and others like it. But an often ignored topic of discussion includes cryptocurrency refunds, or the process of returning virtual funds when an online purchase is made. MasterCard recently filed a patent application about this issue, which shone a necessary spotlight on these types of transactions. What does their patent mean for payment processing and how will it affect small business owners like you?

MasterCard’s Cryptocurrency Refunds Patent

With a title like “Information Transaction Infrastructure,” chances are you wouldn’t immediately connect this patent to cryptocurrency refunds. But thanks to astute analysts and researchers who keep a close eye on cryptocurrency news, we know a little more about MasterCard’s virtual payment plans.

The patent, which has an ex-senior analyst at MasterCard listed as its sole inventor, details an infrastructure which would allow users to verify their identities. Through this infrastructure, users could opt in to linking their identity to specific cryptocurrency addresses, which could be useful when users submit payments to merchants from cryptocurrency exchange accounts.

Holding on to a user’s identity could facilitate refunds, since exchanges hold funds from many different users. So if a merchant needs to send back funds for any reason, having an established link would make it easier to verify all the transaction details.

MasterCard’s patent shows they believe users should have two cryptocurrency wallets – one public, and one private. By having one public wallet, it will be possible to conduct verified transactions and receive a refund.

Are There Other Ways to Handle Cryptocurrency Refunds?

Since Bitcoin has been actively used for years now, it’s no surprise that this isn’t the first work done in regard to refunds. Services like Bitrated have built reputation and arbitration platforms for cryptocurrency. A key difference between many of these services is a focus on letting cryptocurrency users build credibility as good consumers without needing to link their actual identity.

It will take time to see if MasterCard’s idea turns into a viable system. But regardless of the outcome, it’s clear that MasterCard is interested in cryptocurrency. Over the last few years, the company has filed several patents and led projects related to this technology, like releasing blockchain APIs.

As cryptocurrency developments continue, you can count on us to cover them and how they may affect your business. In the meantime, ensure you’re paying the lowest processing rates and getting access to all the latest tools – check out our list of recommended credit card processors and start saving big on your payment processing.

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