Yes, you can subtract returns or refunds from your card statement balance. However, these refunds may not be immediate. Credit card refunds are a form of authorization. It takes some time and is in a pending state. While this refund is in the pending process, your issuer of credit card holds the funds that you have gotten as a refund so that you don’t purchase something else of the same amount. You might not see the amount refunded on your account statement for a couple of days though.
In case your refund is not processed till your billing cycle is complete, you will have to pay your credit card bill and it will be settled later. In a case scenario where you have returned an item and got rewards points instead, your rewards balance would be impacted. A credit card acts like a loan that you have to repay at the end of the month. There is a limit for a credit card known as credit limit. This indicates how much you can spend using the credit card. Some known issuers of credit cards are Discover and American Express.
What happens with your credit card when you get a refund/return?
We often face a situation where we rethink on a purchase and do not want it anymore. In a case scenario where we have made the purchase through our credit card, we are concerned about how will we get a refund. If you are in this dilemma and are not going for a refund then do not worry about it and go straight away to the store where you purchased the products from.
When you return a product, here is what happens with your card account:
- The business or shopkeeper would issue a refund to the account of your credit card.
- It would take about a week to show the credit that is refunded in the transactions through your credit card.
- The points that you have earned or the cash that you have gotten back on your returned purchase would be reversed.
How long would the refund take?
The good news is that you can subtract the return or refund from your card statement but the sad news is that it does not show immediately on your statement. A refund for an item that is returned would take about a few business days, in general, to show up on the statement. In most cases, it could take even a week or more before the purchase that is refunded appears on the ledger of your credit card and to make changes on your card balance.
The good part is that you are not held responsible for making a payment on the fund that is charged when the refund is being processed during the billing cycle of the credit card. However, if you have returned an item after or very close to the billing cycle’s end than the transaction’s refund would not show earlier than your next payment is due for the credit card. It does not matter what is the timing of your return or purchase, if you fail to pay the bill of your credit card, you are very likely to be penalized by the company of your credit card for a late fee. This means even if you are expecting a refund, you cannot avoid to make a minimum payment to the card issuer.
What happens if your account has Zero balance during a credit card return?
A credit can always be added to your account that you can apply to future transactions in case you have a zero balance in your credit card when your return is processed. In a case scenario, where your credit card has remained inactive for a couple months having a negative balance, the issuer of your credit card will most likely send you a cheque for the funds credited. In case you are not sure or are concerned about your refund, you can always call the company of your credit card and ask them for a cheque for refund that has been credited to your account. You can ask them to mail it to you and eliminate the wait.
In such a case that your credit card has a balance while a refund is issued for a purchased item during the previous billing cycle, the credit would be applied to your account. This would reduce your existing balance of credit card.
If you would have purchased an item and carried the balance to another period’s statement than there are chances that you might be charged interest. In this case, if you ask for a refund, the interest would not be refunded.
It is observed that customers do not usually return purchases immediately or during the same billing cycle. In most cases it is not even near to the same billing cycle. Customers return the purchase after months have passed when they originally purchased the good. Surprisingly, the refund can still be found in the credit card statement.
What happens to rewards, bonuses and cash backs?
Sadly, when you return a purchase and get a refund which is credited to your credit card account, any bonuses, cash backs or rewards that you may have gotten on originally purchasing the item, will be lost.
The issuers of credit cards have some policies which state that they would lessen the reward points or cash back credit that you have earned previously from your account when you get a refund. It is fair enough because if there would not be such a policy then customers would take advantage by getting refunds and gathering a lot of reward points on big purchases.
In general, the same policy applies for signup bonuses. Such bonuses are generally found on travel and rewards credit cards. This means that if you have gotten a signup bonus when you purchased something and later returned it, you will lose that bonus. You must go through the card agreement in order to find out how the rewards and bonuses would be settled in case of refunds.
However, you must be aware of the fact that you can also get a negative reward balance. If you have purchased an item and have gotten some rewards on the original purchase. And have also redeemed those rewards. In this case if you return the item then you will end up getting a negative reward balance. This means that you will have to earn some rewards by purchasing items and then get back to zero. So that you can end up getting a positive reward balance.
How Negative Balance works on Credit Cards?
There are some situations where you are able to get a credit card refund even after you have paid your bill. This means that if you are not indebted to the issuer of your card. When your refund is being processed you may get a credit in your account. This might be the case also when the amount you are getting refunded is more than the outstanding account balance. Such credit category is known as overpayment, negative balance or a credit balance.
Although the name itself does not give a positive outlook. But a negative balance is not considered to be a bad thing for a credit card. A negative balance means that the company of your credit card owes you instead of you being indebted to them.
You will be surprised to know that having a negative balance on your card acts the same way as having a gift card. When you purchase anything in the future, it would be subtracted from the credit present on your account. In such a case when you have spent all the credit amount, you will be billed for your future purchases normally.
The policies for overpayment may vary among the companies of credit cards
In a case scenario where you have not been using your credit card for a couple of months. The credit card issuer might give you a cheque for the credit that is outstanding on your account. However, the policies for overpayment may vary among the companies of credit cards.
As a credit card user, if you have any queries regarding what are the policies for negative balances applied to your credit card. You can go through your agreement of credit card and call the number of customer service mentioned on the back of your credit card a call.
If you are worried about how a negative balance would affect your credit scores then don’t worry. A negative balance would not harm your credit scores. Sadly, it would not benefit your credit scores as well. It does not matter how much the issuer of your credit card owes you. You will still have zero balance on the reports of your credit due to the negative balance. So do not worry about how it would affect it.
How to request a refund cheque?
In most cases, people do not want to spend the refunded funds right away. If you are one of them and you would like to get access to your refunded funds in terms of cash. Then you would not be willing to wait for the issuer of your card to send you a cheque. In this case you can get in contact with your card issuer and speed the process.
According to Federal law, your credit card company should send you your requested refund within 7 working days of your request. Especially when you have a credit balance on your account. But you must request that refund and it should be in writing.
Although, the Federal law does not allow customer service representatives of card issuer companies to attend to refund requests on the phone. But some card companies do so for the convenience of their users. If your credit card issuer does. So then you can call on their customer service number and find out if your card issuer policy allows so. There are chances that your card issuer might ask you to mail them the refund request. You can send a refund request through certified mail and attach the receipt of return.
Apart from this, the Federal law states that if cardholders have any leftover credit balance on their account. Card issuers must send it to them after six months. In such a case that the issuer of your credit card is unable to reach you. They should try tracing you through other means such as your telephone number or your last known address etc.
What happens when you ask for returns for transactions incurred in a foreign currency?
One area which could become pretty complicated depending on the agreement of your card is when you have purchased an item in a foreign currency. However, the situation can vary from one card issuer to another depending on their policies.
Some card issuers charge a fee for foreign transactions and some do not. If your card issuer charges a fee for foreign transactions than there is a chance that you may not get that fee when you ask for a return. However, if you want the foreign transaction fee back, then you must call your card issuer and request for a refund for it.
Moreover, there are chances of fluctuations in the rate of the foreign currency. If a lot of time has passed since you had originally made the purchase. Companies of credit cards make use of the existing market rate of the currency. That you have used to purchase an item in situations of refund.
The trading market of currency also acts the same
They would see what is the current market rate of the foreign currency. And then analyze how much should be refunded. This can be either good news or bad news for you. If the current market value has increased then you might make money. Whereas if the currency rate has declined then you might lose money. Which wouldn’t be so fulfilling for you.
Another aspect to consider while purchasing an item in foreign currency is that just like the markets of regular commodities. The trading market of currency also acts the same. This means when you purchase a currency unit. You will have to pay more and when you go to sell it. It would sell for a slightly lesser price. So, if you have made a purchase in a foreign currency, and you plan to return it. Do it as quickly as you can as the more time you take to return it. The more chances will increase of losing your money.
What happens to the money?
When a customer uses their credit card to purchase an item. The business or shopkeeper begins the procedure of getting paid by the issuer of the credit card. And not by the customer who is purchasing the item. As the transaction is processed and gets approval. The credit amount available in the customer’s account is lessened and is eventually billed later by the card issuer company.
Now if the customer is able to pay the credit bill or not is not the problem of the business. Retailer from whom the customer has purchased an item. This is because the business has already received the money in return for the purchase made. However, when the customer asks for a return for the purchased item. The business issues a refund to the account of the credit card. Instead of giving the amount directly to the customer. This is because the business is paid by the issuer of the credit card and not by the customer itself. Therefore, the customer does not get to receive the cash. On a refund for a purchase made by the credit card.
But on an end note, you can subtract returns or refunds from your credit card statement.