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How Do Credit Card Refund Work?

January 15, 2024 • 228 views

Often, purchasing things with a credit card is convenient and has various benefits, such as cashback, rewards, and protection from fraud. However, sometimes you might want to return the product because it was defective, or you placed an order by mistake. Thankfully, with the credit card refund option, you can get your money back on time. Keep reading to know how!

What is a Credit Card Refund?

Every time you pay with a credit card, the credit card companies authorise the transaction. Likewise, in case you would like to return an item, your card issuer will verify your request before making a refund. This credit card refund transaction does not come in the form of cash; it will be reflected on your credit card account.

The credit card refund process starts immediately once the credit card company approves your refund application. You can also use the return protection in case your credit card issuer is unable to refund the amount.

How Do Credit Card Refunds Work?

To understand the credit card refund process, it is essential to understand how a credit card transaction takes place.

When you decide to pay for your purchase via a credit card, the card-issuing financial institution makes the payment on your behalf. Then, the amount gets credited from the credit limit of your card after the transaction is approved. Next, you repay the amount to your credit card issuer in equal instalments, which gets added to your current credit card limit.  

In the case of a credit card refund, the vendor notifies your card issuer of the refund initiation before crediting the amount when you make a refund request. As soon as your card issuer approves your request, the vendor initiates the refund process.

What is the Time Frame for Credit Card Refunds?

The credit card refund process generally takes up to three to ten business days before the refund is reflected on the credit card statement. The refund time varies depending on the lender and the credit card vendor’s policies.

The Difference Between Refunds and Chargebacks

A credit card refund is when a vendor refunds you directly to your credit card for the purchase you have made. A chargeback, on the other hand, is initiated by you through your credit card issuer to dispute a charge, typically due to issues like fraud or dissatisfaction with the product purchased by you.

Also Read - What is the Minimum CIBIL Score Required for a Credit Card?

7 Tips for Handling Credit Card Refunds

Here are 7 tips for handling credit card refunds:

  • Review Policies: Understand the vendor’s refund policy to know the timeframe and conditions for a refund.
  • Maintain the Essential Documentation: Save receipts, emails, messages, or any kind of communication that is related to the purchase for your reference.
  • Contact the Vendor: Reach out to the vendor and request a refund.
  • Know Credit Card Issuer Policies: If the refund is not reflected on your credit card statement from the vendor’s end, then check your credit card issuer’s policies on dispute and refunds.
  • Initiate on Time: Act promptly. Some credit card issuers have a specified deadline or duration within which you can dispute charges.
  • Provide Evidence: When disputing, provide evidence, such as receipts, emails, messages, or proof or return if applicable.
  • Follow-up: Stay in touch with the vendor and credit card issuer to ensure that the process is moving forward.

Also Read - Do's and Don'ts of Using a Credit Card

To Conclude

Credit cards are undoubtedly a great financial tool for purchasing something on credit. It has versatility and amazing benefits, such as rewards, cashback, fraud protection, etc. However, the process of refund can be a bit slower, unlike when making purchases. This happens due to the process of refund, which needs to be approved by both the vendor and issuer to reflect on your credit card statement. While handling your credit card refund, remember to follow the seven tips mentioned above to help you resolve refund-related issues quickly.

FAQs

  • Do credit card refunds affect your credit score?

No, the credit card refund will not have a negative impact on the credit score. However, if you raise the refund and dispute multiple times it could raise a concern with your credit card issuer and might lead to an enquiry which can affect your credit score.

  • What happens to rewards earned from the refunded purchase?

The rewards you have earned post the purchase of a product will be deducted from your account once the amount is refunded to your account.

  • Does a credit card refund go towards your required payment?

The refunded amount to your credit card account will not be applied against the monthly bill amount, not even in part.

  • What happens if my account has a zero balance after a credit card refund?

The credit card account statement will display a negative balance if there is no remaining balance.

  • What are the disadvantages of credit card refunds?

Refunds on credit cards are just one of the various advantages that come with using credit cards. Not every aspect of credit card refunds is advantageous to you. For example, you might still have to pay interest and fees on the entire amount of your transaction, and you'll probably lose any rewards you've earned from the initial purchase.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

We are a team of expert writers and editors passionate about providing our readers with authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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