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How Does a Credit Card Refund Work?

6 min read

Last Updated: September 9, 2025

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Key Takeaways

When you return an item you’ve purchased with your credit card, you may receive a refund as a statement credit on your account.
Your refund might post to your credit card account immediately or in a few days, depending on your circumstances.
A credit card refund doesn’t necessarily affect your credit score.

So, you purchased something on your credit card, and it didn’t work out. What happens next? Hopefully, the merchant has a good return policy, so you can get a refund. For a cash refund, the merchant may simply open their register and hand you the right amount of cash. For a debit card refund, the money would go back to your bank account. However, the credit card refund process works a little differently. The funds return to the issuer, leaving you with a lower credit card balance.

How do refunds work on a credit card?

The cash or debit card refund process is fairly straightforward. After you return a purchase to its seller, the seller returns your money. But because a credit card transaction follows a different process, credit card refunds work differently as well.

When you make a credit card purchase, you’re borrowing money from your card issuer and increasing your balance. When a retailer gives you a credit card refund, the funds return to your card issuer. Your card issuer, in turn, brings your balance back down.

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Take, for example, a sweater you buy for $60. When you make the purchase with your credit card, the merchant asks for payment from your credit card company. Your card issuer pays the retailer and increases your account balance by $60. You may pay back the $60 to the card issuer at the end of the billing period or carry the balance (plus interest) over time.

But maybe the sweater doesn’t fit quite right, so you decide to return it. The merchant takes the sweater back and returns the purchase amount of $60 to your credit card company, not you. Your credit card issuer may then issue you a credit card statement for $60, decreasing your balance by the refund amount. If you’ve already repaid your debt, your balance may dip into the negatives.

How does a credit card return affect your credit?

A credit card return may or may not affect your credit score. To understand why, consider your credit utilization ratio.

Your credit utilization ratio is the percentage of your total available credit that you’re using. The lower your credit utilization ratio is, the better it is for your credit score. A credit card refund may improve your credit score by increasing your available credit, thereby decreasing your credit utilization.

Let’s say you have a $200 balance on your card that has a $1,000 credit limit. Your credit utilization for that account is 20%. But then you receive a $60 refund for the sweater you’ve returned, bringing your balance down to $140. Your credit utilization would drop to 14%, which may help your score. But if you’re not carrying a balance when you receive your refund, your credit utilization rate for that account is already zero, so it may not affect your score.

Does a credit card refund go toward your required payment?

Credit card refunds don’t automatically count toward your monthly minimum credit card payment. Instead, they appear on your account as a statement credit for the refund amount. So, if you have a balance of $200 and a monthly minimum payment of $50, and you receive a $60 refund, you still have to pay the minimum payment because you’re still carrying a balance.

If the $60 you spent on the sweater is your only balance and your credit card bill due date arrives before your refund, you should still make at least the minimum credit card payment.

Does a refund on a credit card affect your rewards?

Yes. If you earned credit card rewards on a purchase, you’ll lose them when you receive a refund.

Did you know?

If you’d like to keep the credit card rewards you earned for a purchase you want to return, you may ask the merchant to refund you in the form of a store credit for the refund amount. But that means you’ll still have to pay for the purchase on your credit card.

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How long does a credit card refund take?

The time it takes for a credit card refund to appear on your statement varies. Some refunds might show up within a few days. Others may take weeks, especially if you have to ship an item back to the seller.

What happens if you have a negative balance after a refund on your credit card?

If you pay your credit card balance in full every month, a refund may lead to a negative balance on your credit card.

For example, say you have a zero balance on your account after you pay your credit card bill. If your credit card company refunds the $60 sweater, your account balance may appear as -$60. While negative balances are bad for checking and savings accounts, they’re usually not a problem for credit card accounts. For a credit card account, a negative balance just means your credit card issuer owes you money. You may apply a negative credit card balance to future purchases or request a refund.

How do you request a credit balance refund?

If you have a negative balance on a credit card account you don’t use often, you may want to request a credit balance refund to receive the amount in cash. To make a refund request, contact your credit card issuer online or over the phone. You may request the refund via check, money order, or direct deposit. Your credit card issuer may require that you submit your refund request in writing before the issuer releases the funds.

Do negative credit card balances impact credit scores?

A negative credit card balance typically doesn’t appear on your credit report or affect your credit score.

However, a credit card refund might make it more difficult to keep track of your credit card balance, which may cause issues in the future. This is one reason to check your credit card statements every month, so you know your outstanding balance and available credit.

The bottom line

If you have to return something you’ve bought with a credit card, you’ll likely receive a refund in the form of a statement credit on your account within a few days or weeks. But remember, getting a credit card refund means losing the rewards your purchase earned. You may be able to request a store credit if a credit card refund doesn’t sound like a convenient option.

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