What happens to credit card rewards after I return a purchase?

There are many reasons why you might want to return a purchase made with your credit card, from purchases to products or services that just don’t cut it. If you purchased the product with cash or a debit card, the return process is quite simple: you return the product and your money is immediately returned.

But what about refunds when using a credit card? Now you need to think not only about the money refunded, but also about the rewards you earned for your original purchase. Unfortunately, if you receive a refund for your purchase, you will not be able to keep your earned rewards.

Here’s what you need to know about what happens to credit card rewards when you make a refund.

What to Expect When Refunding a Credit Card

The time it takes to receive a refund for purchases made with your credit card depends on the merchant you purchased the item from and your credit card issuer. If you bought an item that qualifies for a return-only store credit or does not allow a return at all, there is nothing your credit company can do to facilitate that return.

If the company allows returns, the return period is usually from a few days to a week or more. Even after the merchant has processed the refund, the actual time it takes for the refund to appear in your account is set by your credit card issuer.

When you make a refund, the money that is returned is related to your outstanding balance and is not returned to you directly. This means that if you return a $150 pair of shoes with a $500 balance, your new statement will show a balance of $350.

However, if you return the same pair of shoes after you have already paid off your balance in full, you may end up with a negative balance. While this may sound bad, it means that the credit card company owes you money to cover your expenses until the negative balance returns to zero. So if your account balance was $0 at the time of the refund, your balance would become +$150 (essentially a credit) which would decrease as you shop.

Can you keep credit card rewards after returning a purchase?

So, you’ve decided that you didn’t like the shoes you bought, or that the new mattress you bought is too hard. You can get a refund, but what about earned rewards?

Unfortunately, you won’t be able to save them.

As frustrating as it may be – whether it’s cash back, points or miles – credit card issuers around the world will deduct rewards from your account after the refund is processed.

If you have used the Rewards you have earned before you made a refund, you may receive a negative Rewards balance or negative points. Unlike a negative account balance where the issuer owes you, a negative rewards or points balance means you owe the issuer rewards. The rewards you earn from current purchases will “fill up” the reward deficit until you are back to zero.

There is a loophole so you can keep your rewards

Due to the way credit card transactions are processed, where the merchant is paid by the credit card issuer on your behalf and then the credit card company expects you to refund them, there is a loophole where you can either return the purchase or keep your rewards.

If you have purchased an item that can be returned in the form of store credit or deferment for services, you can keep your rewards for that purchase. As for the credit card company, they paid the merchant and you paid them. Issuers will only deduct your rewards if they need to process the actual refund.

bottom line

When it comes to making a purchase with a credit card, the transaction takes less than a second. However, when it comes to returns, the process can be a bit longer. If you’re planning on making a return, you most likely won’t be able to keep your purchase rewards unless you consider options like store credit.