How Do Refunds on Credit Cards Work?

Q: What happens when money is refunded on a credit card?

If you buy an item with a credit card and then return it, the retailer doesn’t pay you back directly. Instead, it will ask the credit card issuer to issue a credit to your account for the amount in question.

Q: How long do credit card refunds take?

From the time you request a refund to when the credit appears in your credit card account can vary, but it can typically take between five and 14 days. It’s best to check online to make sure you have received the funds.

Q: What happens if I pay off my credit card and then get a refund?

If you get a refund on a credit card account with a zero balance, you’ll then have a negative balance — which is to say, a credit. You’ll be able to use that money toward subsequent purchases you make with the card, or you can request that the credit card issuer pay the money to you.

How Do Refunds on Credit Cards Work?; A finger presses a key on a credit card machine.

Nancy BilyeauUpdated October 24, 2025

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent, and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or network providers. Read more about our Editorial Guidelines and How We Make Money.

Making a purchase from a store and then having to return it for one reason or another is a common experience. But the original payment method, especially if it was a credit card, determines how the refund is paid out.When you’re returning an item that was paid for in cash, the refund is typically instant. However, if you paid with a credit card, the refund will not instantaneously appear back in your account. It typically takes seven business days for credit card refunds to be processed.Keep reading to learn more about credit card refunds, how credit card refunds affect rewards, how long refunds take to appear on your credit card, and more.

What Is a Credit Card Refund?

A credit card refund is what you will receive when you return an item that was purchased with a credit card as opposed to another method, like cash. When you make the return, you will receive a credit on your account that is equal in amount to the cost of the item returned. However, unlike returning a cash purchase, this process involves more parties than just you and the merchant — and because of this, you won’t see your credit card refund right away.

How Do Refunds Work on Credit Cards?

To understand why credit card refunds don’t work the same way as cash refunds, it’s important to first understand how credit cards work compared to payments made in cash. When an individual makes a purchase from a merchant in cash, they exchange funds directly with the seller. But when they charge a purchase to their credit card, they’re not exchanging money with the merchant. Instead, credit card transactions involve several additional parties beyond the buyer and seller, each playing a role in facilitating the collection and payment of funds (and later refunds). Essentially, a credit card transaction requires a series of conversations between the merchant’s bank, the bank that issued the buyer’s credit, and the payment processor and credit card company, who facilitate the whole thing.Here’s an example of how it plays out:

Let’s say a customer named Sam pays for their purchase at Chic Boutique with a credit card. From there, Chic Boutique will submit Sam’s card information and transaction details to its bank for authentication and authorization using a payment processor.
The request then flows to the credit card company, which in turn submits the request to the cardholder’s bank.
If the transaction is approved, the communication flows back through the same channels and Chic Boutique is notified that the transaction is authorized.
The issuing bank then sends the payment to the merchant’s bank.

Because credit card transactions are a form of credit, the monies owed are added to the buyer’s credit card statement, and those funds are owed to the bank that issued their card.That’s why a refund to a credit card is not as simple as the merchant handing money back to the buyer. Credit card refunds flow back through the same channels as the original transaction, with the refund ultimately being credited back to the buyer’s account.When refunded, the amount then appears as a credit on the buyer’s credit card statement. And until that occurs, the original purchase amount will still count towards their credit limit. Because of this, it’s a good idea to take the timeframe into account when you’re considering other expenditures in the interim.Recommended: How to Find the Right Credit Card

How Long Does It Take for a Refund to Appear on the Credit Card?

While some merchants may issue refunds immediately, others may take several days or even as much as a month to process the cash back. Once the refund has been processed, it can take an additional three to seven days before that credit is posted to the cardholder’s account.Because the amount of time it takes to see a credit card refund depends on the seller’s processing time, it’s a good idea to check with the merchant for an estimated timeline.

Is a Credit Card Refund a Payment?

It’s important to keep the timelines for credit card refunds in mind when you make credit card payments to avoid late payment fees or taking a hit on your credit score. Although a credit card refund will decrease the balance you owe on the account, it’s not the same thing as making a payment.To understand why, it’s important to be familiar with how payments work. Each month, the cardholder must make at least the minimum payment or they may face a late fee, interest, and other potential penalties. To be safe, make a point of paying at least the minimum amount due by the date on your statement regardless of any credit card refunds you may be expecting.Additionally, because there is a delay between when the return is made and when the credit reaches the buyer’s credit card account, the refund may not land until after the credit card payment is due. Therefore, it’s also a good idea to check your account online to know when the refund is applied and ensure that you still make the required payment by the due date.

What Happens If I Have a Negative Balance After a Refund on My Credit Card?

If the purchase being refunded is worth more than the rest of the current charges on a credit card, it will result in a negative balance. This means that the issuing bank owes money back to the cardholder instead of vice versa.There’s nothing bad about having a negative balance. That credit is simply applied toward future purchases until it is depleted. However, there may be scenarios where it’s not ideal to keep that credit in the credit card account — for example, if it’s on a rarely used backup credit card or the refund was for a big ticket item that exceeds the cardholder’s regular spending.In such instances, the individual can get that money back. Federal law requires the issuing bank to refund a credit balance of more than $1 within seven business days of a written request from the cardholder. If there is still a credit remaining on the account six months after the refund, the bank may also automatically try to issue it back to the cardholder.

Does a Refund on Credit Cards Affect My Credit Score?

A refund shouldn’t have too much impact on your credit score if it is applied quickly and managed carefully to avoid an accidental late payment. But there are some ways a refund (or the timing of a refund) may affect your score.Credit utilization, or the ratio of credit that you’re using relative to your total credit available, makes up 30% of your credit score. A lower credit utilization rate is generally treated as a good thing because it signals that you can successfully manage their debt.While smaller refunds shouldn’t have a big impact on your credit utilization — especially if balanced out by other purchases over a statement period. A major purchase may skew your credit utilization rate temporarily.For example, a big refund may decrease your overall credit utilization and may build your credit score if not offset by other spending. Conversely, if a big refund is delayed and that amount remains outstanding for a long period of time, it will temporarily increase your credit utilization rate, thus potentially lowering your score.A refund can also affect your credit score negatively if you incorrectly count it as a payment and then don’t make the minimum payment on any balance remaining. Payments are considered late and reported to credit reporting agencies after they are 30 days past due — and getting dinged will remain on your credit report for up to seven years after the late payment.Recommended: 5 Factors That May Affect Your Credit Score

Does a Refund on a Credit Card Affect My Rewards?

For cardholders whose credit cards reward them with perks for spending — whether in the form of credit card points, cash back, or other rewards — it’s also a good idea to brush up on how refunds affect those benefits. Rewards from credit cards are usually based on money spent — and typically exclude any refunds from these accruals.Depending on the credit card terms, any bonus or promotional awards that were earned as the result of the original purchase may also be revoked.

Other Credit Card Refund Methods

If you paid for a purchase with a credit card and then returned it, there’s a good chance you’ll get your money back in the form of your original payment method. It’s unlikely a cash refund will be an alternative to a credit card refund, especially given how credit card refunds work.In some cases, you may be able to get a gift card or store credit in lieu of a credit card refund. Just keep in mind that will limit you to using your funds only at that location instead of however you’d like, as would be the case with a credit card refund.

The Takeaway

Although credit card refunds may involve more backend steps than cash purchase refunds, it’s generally a straightforward process. Still, it’s a good idea to understand the basics in order to avoid any potential pitfalls.It’s also always a great idea to make sure your credit card is a good fit for your unique spending habits and needs. If you need help shopping around for the right credit card for your needs, Lantern by SoFi can help. The Lantern credit cards comparison tool makes it easy to see how different cards stack up.

Frequently Asked Questions

What happens when money is refunded on a credit card?

How long do credit card refunds take?

What happens if I pay off my credit card and then get a refund?

Photo credit: iStock/courtneyk

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About the Author

Nancy Bilyeau

Nancy Bilyeau writes about student loans, mortgages, car insurance, medical debt and many other finance topics for Lantern. A veteran of the magazine business, she has edited stories on personal finance for Good Housekeeping and DuJour magazines and has written articles for The Wall Street Journal, Readers' Digest, Parade, Town & Country and Lifetime/A&E, among others. She is a graduate of the University of Michigan.

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