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Returns on credit card purchases typically work the same as they do with other forms of payment. You return the product and the money is refunded to your account. Simple enough.
But what happens to the credit rewards you've earned when you return a purchase? Unfortunately, you generally lose rewards when you get a refund for a purchase. Here's how it works.
What Happens to Credit Card Rewards When You Return a Purchase?
Just as your card issuer adds rewards to your account when you use your credit card to make purchases, they also deduct them from your points balance when you get a refund. You can see credit card refunds listed on your account statement. For example, let's say you return a $75 pair of jeans for which you earned 300 reward points. Your statement will show a "-$75" in the amount column and "-300 points" in the rewards column.
- What if you use the rewards before making a refund? Your card issuer will still deduct the rewards and your account could show a negative balance. In that case, your future payments and purchases will balance out the rewards deficit until it reaches zero.
- What happens to rewards points or miles you accrue toward earning an intro bonus? The answer may depend on whether you've already received the bonus. If you're still working to hit the qualifying threshold for the intro bonus, the rewards will likely be subtracted from your points total. However, if you've already received the intro bonus, many card issuers won't rescind it if a return drops your point total below the spending requirement. Contact your credit card company for clarification to be safe.
- How long does it take for the card issuer to take your rewards back? Any rewards you've earned—whether cash back, points or miles—are generally deducted from your rewards balance as soon as the return is posted to your account. Returns are usually processed within a few business days but can take longer, depending on the credit card company and merchant. You can see the adjustment in your account's online dashboard right away, although it may not appear on your monthly statement until your next billing cycle.
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Can You Ever Keep the Rewards?
You can keep the rewards you earn if the merchant issues you a gift card or store credit in lieu of a return of payment. After all, you're not receiving any money back. The merchant still receives payment from the credit card company, and the transaction amount remains on your credit card balance. Consequently, the rewards are still yours to keep.
Similarly, you effectively "keep" your points when you exchange items with a merchant. Any point deduction from a refund is "re-earned" with the new transaction.
What Happens if You Already Used the Rewards?
You'll get a deduction in your rewards balance if you use the points or miles you earn from a purchase before refunding it. Rewards earned from new transactions will then "pay back" the negative balance until your balance reaches zero.
Your credit card company is in a similar position if you get a refund after paying off your account balance in full. In that case, you'd have a negative balance, and future purchases or transactions would offset the amount until it returns to zero.
Use Your Credit Cards Responsibly for Maximum Benefit
Credit card rewards can give you cash back, travel discounts and a whole host of other perks. These rewards can be beneficial, but they may not be worth it if you're charging more than you can comfortably afford to repay in full each month. Remember, paying interest on your credit card transactions can offset any benefit or value you receive.
Making regular, on-time credit card payments can also help you build credit since your payment history makes up 35% of your credit score. Also, aim to keep your balances as low as possible. Your credit utilization rate—the percentage of your available credit you're using—accounts for 30% of your credit score.
Get a copy of your credit report and score for free with Experian to see where credit stands. Address any issues you find by taking steps to improve your credit since lenders tend to offer their most favorable rates to those with higher credit scores.