How Credit Card Refunds Work

Image shows a wallet with cash, a credit card, and a generic ID inside. Text reads: "What to know about credit card refunds: credit card refunds are not immediate—it's just an authorization; while your refund is pending; your credit card issuer puts a hold on those funds so you don't spend that money somewhere else; the actual refund doesn't post to your account for a few days; depending on the point in the billing cycle that your refund is processed, you may still have to make your credit card payment; returning an item that gave you rewards points will affect your rewards balance"

Image by Nusha Ashjaee © The Balance 2020

At some point, everyone has purchased something they needed to return for a credit card refund: Maybe the sneakers didn't fit or you decided the dress wasn't your sister's style after all. How long your refund takes to be processed and reflected on your credit card statement depends on both the retailer and the card's issuer.

The timing also depends on the method of the return. If you take the unwanted item back to the store where you bought it, the person who waits on you can swipe your card and begin the process of reversing the charge right away. Mailing back an item to the retailer will naturally delay the process by the amount of time it takes for the package to arrive.

Macy's, for example, says it begins processing a credit card refund immediately after the returned item arrives in the mail. Nordstrom says it processes returns within 10 to 14 business days of receiving the item.

According to PayPal, refunds should appear on your credit card—any credit card—within 30 days of your request.

Credit on Your Account

Whenever the refund is processed, it will show as a credit—a negative amount—in your account. Because the credit will be in the same amount as the initial charge, the net effect on your outstanding balance will be zero.

Refund vs. Billing Dispute

Note that a credit card refund is different from a billing dispute. A refund is when you return an item to the merchant to have them credit the money back to your account. A billing dispute is for when you didn't receive the merchandise you charged to your account or your account was charged for something you didn't purchase. You should contact your credit card issuer within 60 days of the charge appearing in your account if you want to dispute it.

Payment Required

You may have to make a credit card payment while you’re waiting for a refund to be processed. If your billing cycle closes with a balance and the refund hasn’t posted yet, you’ll be required to make your minimum payment as normal on or before the due date to avoid paying a late fee. Any interest charged on the original purchase amount won’t be subtracted from your account when the refund is processed.

If the credit card refund is more than your remaining balance after you've made a payment, you will end up with a credit to your account that you can use to cover future purchases. If you don't use that card very often, you may be able to request a check in the amount of the credit.

Credit Card Rewards Points

Returning an item that gave you rewards points will affect your rewards balance. Once the credit card refund is processed, the reward points will be subtracted from that balance. This policy prevents people from abusing the rewards system. If credit card companies allowed people to keep rewards points after returning purchases, you could imagine that people would take advantage of that situation to get free points.

Refunding to a Different Credit Card

Most merchants will allow you to receive a refund back only to the credit card you made the original purchase with. If for whatever reason you don’t have the credit card available, you may be able to get a gift card or a store credit in the amount of the purchase.

A retailer will almost certainly refuse to give you cash for a returned item you bought with a credit card.

Request Time Limits

Retailers have different time limits for returning an item and requesting a refund. Target, for instance, gives you up to 90 days to return an unopened, undamaged item. Best Buy allows returns to be made only within 15 days unless you're a My Best Buy Elite or Elite Plus member.

Many retailers post their return policy in the store or on their website. Unless a product is unique to the retailer in question, you should expect to show your receipt proving you made the purchase there.

Article Sources

  1. Brex. "How Does a Credit Card Refund Work?" Accessed March 19, 2020.

  2. Macy's. "How Long Does It Take for My Store Refund to Be Credited?" Accessed March 19, 2020.

  3. Nordstrom. "Returns & Exchanges." Accessed March 19, 2020.

  4. Consumer Financial Protection Bureau. "How Do I Dispute a Charge on My Credit Card Bill?" Accessed March 19, 2020.

  5. Consumer Financial Protection Bureau. "There Is a 'Credit Balance' Shown on My Statement. What Is a Credit Balance?" Accessed March 19, 2020.

  6. Target. "Return Policy." Accessed March 19, 2020.

  7. Best Buy. "Returns and Exchanges." Accessed March 19, 2020.