It can happen to any of us: you overdo it at the store, something doesn’t work as advertised, or you have buyer’s remorse. So you return the merchandise and get a refund. But if you do, and if you earned rewards on your credit card on that purchase, what happens to them? Do you lose rewards on returned purchases? Do you have to refund your rewards?
Well, you don’t have to refund your rewards – but they will be refunded. Your credit card will effectively pull them from your credit card statement. So, yes, typically, those refunds will disappear.
When you make credit card purchases, especially with a rewards credit card, returns can directly impact the rewards or points you earned from those transactions. The process of returning items and receiving refunds can affect not only your rewards balance but also any bonus earnings, and it’s important to understand how this works with different types of purchases and cards.
How credit card refunds work during holiday returns
Credit card refunds work the same around the holidays as they do all year; however, retailers often allow more time to return merchandise during the holiday season. A credit card refund is the process by which the amount you paid for a returned item is credited back to your credit card account, reversing the original transaction. This differs from a debit card refund, where the money is returned directly to your bank account, and protections and processing times may vary between debit and credit card transactions. But here’s how you can expect things to unfold:
- You return the item to the retailer.
- The retailer initiates a refund, which is a reversal of the original transaction, processed through your credit card account.
- The refund is sent to your credit card issuer, who then credits your credit card account.
Refunds typically take a few business days to several weeks to appear on your credit card account, depending on the merchant’s policy.
The refund amount will be credited to your credit card account.
Refund timeline and process
When you return an item, the merchant refunds your money. They refund it to the credit card; they won’t give you cash. That’s because once you’re using your credit card, you really have a business arrangement with the credit card company and not the store.
Here’s typically how it works:
- You return the shoes, the TV, or whatever you bought to the retailer.
- The retailer submits a refund request to their payment processor (the company actually responsible for making the technology work when you make a payment with your credit card).
- The payment processor sends the refund to your credit card issuer.
- Your credit card issuer posts the refund to your account.
How refunds apply to your balance
Once the refund posts, it typically shows up as a statement credit, reducing your outstanding balance. The refund increases your available credit and lowers your total amount owed, which can help improve your credit utilization ratio. If you returned a $200 purchase, your balance should decrease by $200.
If you’re carrying a balance, this reduction can slightly lower your interest charges going forward, but it won’t reverse interest already accrued.
What happens if you already paid your credit card bill
Many people return items after they’ve already paid their credit card bill. In such cases, the refund typically lowers your current balance or may even create a negative balance on your account. While a negative balance might sound concerning, it’s actually a good thing—it means your credit card issuer owes you money. This credit can be applied toward future purchases, effectively offsetting new charges. Unlike savings accounts, where a negative balance means you owe the bank, a negative balance on a credit card indicates a credit in your favor. If you prefer, you can leave the credit to cover upcoming expenses or request a refund check or bank transfer from your credit card company.
Do you lose rewards on returned purchases?
Okay, now we’re getting to what we’re really wondering – if you return something, do you lose your credit card rewards? Generally, as noted, yes. When you return a purchase made with a credit card, the rewards points or credit card points earned from the initial purchase will be deducted from your rewards balance. This process applies to both credit card and debit card purchases, though the rewards structure may differ.
How issuers deduct rewards after a return
When a refund posts, your card issuer adjusts your rewards balance automatically. The refund amount determines how many reward points are deducted from your rewards balance. You’ll usually see the returned rewards within one or two billing cycles.
Issuers handle this quietly, which is why some cardholders only notice when their rewards balance suddenly shrinks. For instance, if you earned $15 in cash back on a returned purchase and had been expecting $50 in total cash back from various purchases, your balance will instead reflect $35.
For example, if you buy an item for $100 and earn 2% cash back ($2), then return the item and receive a $100 refund, your issuer will deduct the $2 in rewards from your balance once the refund posts.
What if you already used the rewards?
In that case, if your rewards balance is low or at zero, your credit card could create a negative rewards balance. Don’t worry—nothing too serious happens. The future rewards you earn from new purchases will simply be applied to your negative rewards balance until it returns to positive. Once your balance is positive again, you’ll continue to earn and keep your rewards as usual.
How returns can affect sign-up bonuses and welcome offers
This is where the land of credit card rewards, returns, and refunds can get interesting—and a bit complicated. Meeting the spending requirement is essential for earning bonuses, and using the right card can help you maximize your rewards and benefits.
When you return a purchase, the points or cash back you earned from that transaction are usually deducted from your rewards balance. This can also affect your ability to earn bonuses on a new credit card, as returns may reduce your qualifying spend below the required threshold.
If you used a sign-up bonus or special offer to make the purchase, the issuer may reverse those rewards if the purchase is returned. Additionally, specific limited-time offers may be entirely revoked if the qualifying purchase is returned.
Falling below spending thresholds
Welcome bonuses often require you to spend a certain amount within a set time frame, and holiday purchases are a popular way to meet those thresholds.
However, returns can complicate matters.
If you return an item and your net spending falls below the required minimum, the issuer may determine that you no longer qualify for the bonus.
Here’s an example of how this could happen:
- You spend $5,100 to earn a bonus requiring $5,000 in spending.
- Later, you return a $300 item.
- This reduces your net spending to $4,800, falling short of the bonus requirement.
In such cases, your credit card issuer’s system may flag this and potentially revoke your welcome bonus.
Losing a welcome bonus after a return
If that happens, and your credit card issuer doesn’t notify you—such as by sending a notice that your bonus will be delayed until you make up the spending shortfall—you should promptly contact customer service. If you have questions about your bonus or believe there is an error, reach out to your card issuer for clarification or to resolve the issue. The timing of your return and your payment due date are crucial—refunds can affect your account balance and bonus eligibility depending on when they are processed relative to your billing cycle and due date. Credit card issuers want to reward you with welcome bonuses to keep customers satisfied, but they also need to protect their profits. If you haven’t met the required spending threshold, you technically shouldn’t receive the full bonus until you fulfill the issuer’s spending requirements.
Exceptions: When you might keep your rewards
While most refunds mean your rewards are disappearing, it doesn’t have to be that way. There are some strategies you can take. For example, if you choose store credit or an exchange instead of a refund, you may be able to keep the rewards earned from the initial purchase. Selecting the right refund method can help you maximize the value of your rewards and ensure you get the most benefit from your credit card usage.
Store credit instead of a refund
If you choose store credit instead of a refund back to your credit card, you’ll likely keep your rewards. That’s because the store isn’t losing money in this scenario. When a store issues a refund directly to your credit card, the rewards earned on that purchase are typically deducted since the transaction is reversed. The credit card company provides the cash back by charging the retailer for lending you the money to make the purchase, so if the money is refunded, the rewards must be adjusted accordingly. However, with store credit, the original purchase remains intact, allowing you to retain your rewards.
Exchanges vs. returns
This is basically the same thing as a store credit, or it would seem that way, but there is an important distinction to keep in mind. If you’re exchanging a pair of $90 shoes for a pair of $50 shoes, you might end up seeing some of your cash back, miles or points disappear instead of all of them.
Gift card refunds and their impact
There may be some exceptions, but generally, refunds issued as gift cards instead of returning funds to your credit card allow you to keep your rewards. Like store credit, the store retains the money, so everyone benefits—as long as you’re happy to continue shopping there.
Bottom line on credit card rewards and refunds
Returns are a common part of shopping, and many of us will return items without immediately noticing that some of our cash back, miles, or points have disappeared from our rewards balance.
Even if someone else returns something you purchased on your credit card, they’re likely to receive store credit, do an exchange, or get a gift card. If you provided a gift receipt and they request a refund, the money would be returned to you, not the person returning the item. So it’s unlikely that returns by family or friends will reduce your rewards without your knowledge.
However, if you make a large purchase for yourself or your family and later return it—like a big-ticket item you thought you’d love but decide against—a refund can impact your rewards balance. Remember, a credit card refund does not count as a payment toward your minimum payment due. You must still make at least the minimum payment by the due date to avoid late fees or penalties. Credit card refunds are not deposited into your bank account; instead, they are credited back to your card balance, so you still need to make your credit card payment or pay at least the minimum required amount. To maintain your financial health, monitor your credit report and credit profile after returns and refunds. If you want to preserve those rewards, consider asking for a store credit, store exchange, or gift card instead of a refund.
