Sometimes a credit card purchase that seemed like a great idea when you made it turns out to be a huge mistake.
While you may be able to return a product or cancel a service and get a refund, make sure you understand the refund process, or your credit could take a hit.
There are many reasons why you may want to return a purchase. You may have splurged on a new table only to find it is slightly too large for your space. Perhaps the necklace you bought online arrived with a broken clasp. Or maybe you just changed your mind and decided you didn’t want to spend $999 on an online course so you took the retailer up on its money-back guarantee.
Regardless of why you decide to return an item, “make sure you understand the return policy,” says Rod Griffin, senior director of consumer education and awareness for Experian.
The steps you take after you request a refund to your credit card could hurt your credit or protect it.
See related: What is a credit card chargeback, and how does it work?
How credit card refunds work
Essential reads, delivered weekly
Subscribe to get the week’s most important news in your inbox every week.
By providing my email address, I agree to CreditCards.com’s Privacy Policy
Your credit cards journey is officially underway.
Keep an eye on your inbox—we’ll be sending over your first message soon.
When you make a purchase with cash, the transaction involves two parties – you and the retailer. If you get a refund after making a cash purchase, the retailer can simply give you back the cash from the purchase.
However, when you make a purchase with a credit card, the credit card issuer is involved in the transaction as well. In fact, the credit card issuer extends the payment to the retailer with the understanding that you will pay the card issuer back when you pay your credit card bill. Since the card issuer serves as something of a middleman in the original transaction, the card issuer must serve as a middleman again when you are issued a refund.
That means if you ask for a refund, the retailer must refund the party that paid them, which is the credit card company. The credit card company would then issue the refund to you in the form of a credit on your credit card statement.
Unfortunately, there is no universal rule that determines how long it takes to get a refund. For one thing, retailer policies differ. One retailer may take 15 days to issue a refund while another may take 30 or 45.
“In many if not most states retailers are required to post their refund policies,” says Linda Sherry, director of national priorities for San Francisco-based advocacy organization Consumer Action.
However, “not all these laws require online merchants to do the same,” Sherry adds. Therefore, some merchants may not be obligated to tell you when you can expect a refund at all.
It may take even longer to get a refund if you have to return an item purchased online via mail. For example, according to Amazon’s refund policy, “it can take up to 25 days for an item to reach us once you return it.” It’s not until after the item is received that Amazon would process the refund.
Once the retailer issues the refund to the credit card company, it may take a couple more days for your card issuer to apply your credit.
See related: How do credit cards work?
Can a credit card refund affect your credit?
The way you handle a credit card refund can have implications for your credit score.
If you’re waiting for a refund, you may be tempted to hold onto your money rather than pay your credit card bill since you know the refund is coming. However that would be a mistake, says Griffin.
“If you’re waiting for a refund and you’re not sure if it’s going to be there before the payment is due, make at least the minimum payment,” he said. That way you avoid a late payment, which could not only hurt your credit score but leave you on the hook for a late fee.
Another mistake that could hurt your credit score is believing the refund counts as a credit card payment. Say you are carrying a balance on your credit card and the minimum credit card payment due is $25. Before you make your payment, you see that a refund of $30 is applied to your account for a product you returned.
You may believe you don’t have to pay your bill that month because the credit is for more than the minimum payment due. But that’s not necessarily the case. You could still be obligated to pay the bill because the refund does not count as a payment, Griffin says.
credit utilization ratio – the balance on your credit card in relation to the credit line – goes up. A higher credit utilization ratio can hurt your credit. On the other hand, once a refund is applied, the utilization ratio goes down, which can boost your score.
quickest ways to improve your score, since credit card balances typically get reported to credit bureaus on a monthly basis.
Refunds, negative balances and rewards
Say a refund comes late and you pay your credit card bill to avoid making a late payment. If you paid for part or all of the refunded item when you paid the credit card bill, you may end up with a negative balance on your credit card once the credit is applied.
That simply means your card issuer owes you money. They may either apply the credit the next time you buy something using the card or they may issue you a check if you request it. From a credit standpoint, a negative balance on your credit card won’t hurt you, Griffin says. Rather, the account would be reported to credit bureaus as having a zero balance.
While getting a refund for a purchase you no longer want can be a relief, there could be a downside. If you have a rewards card and you earned rewards on that purchase, those rewards are forfeited if you get a refund on the purchase, according to a Chase spokesman. That means the card issuer will take the rewards back, or if you have already cashed them in, you will have a negative value in your reward balance.
See related: When should I redeem my rewards?
Bottom line
If you’re confused in any way about an expected refund, it doesn’t hurt to give your card issuer a call to let them know you’re expecting a refund as soon as you request it from the retailer, Griffin says. That way you are less likely to run into any surprises, and you can ask directly what they expect from you.
If you are one of many Americans struggling with credit card debt, there are plenty of great strategies designed to get you out of it. From balance transfer credit cards to consolidation loans, there is no shortage of solutions to reduce your balances.
See related: How to pay off credit card debt: 3 best strategies
One unique service is trying to appeal to those with multiple credit card payments every month. Tally offers to consolidate your card payments and help you pay down your debt faster â all for less interest than you currently pay.
Read on to learn more about the service and if it is best for you.
What is Tally?
Tally is a mobile app available on both the Apple App store and Google Play store. It is designed to manage credit card debt and help its users pay down their balance faster.
Essential reads, delivered weekly
Subscribe to get the weekâs most important news in your inbox every week.
By providing my email address, I agree to CreditCards.comâs Privacy Policy
Your credit cards journey is officially underway.
Keep an eye on your inboxâweâll be sending over your first message soon.
Tally users link their credit cards, and the service automatically makes payments, using an algorithm to determine what size payments to make to each card â using factors like highest APR. In order to consolidate your debt, Tally will extend you a single line of credit to cover the payments it makes. That way, you just make one monthly payment to Tally and it takes care of the rest for you.
Right now, Tally is only available in certain states. Eligible locations include Arizona, Arkansas, California, Colorado, Connecticut, Washington, D.C., Florida, Georgia, Illinois, Idaho, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Mexico, New Jersey, New York, Ohio, Oregon, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington and Wisconsin.
How does Tally work?
Tally offers a few different solutions for its users, based on how you want to pay down your debt. The most common service is known as Tally Pays â and puts your repayment in the hands of the app.
Tally Pays
Tally Pays is the heart of Tally debt management solutions. With this service, Tally will extend you a line of credit, based on a soft pull of your credit report. Youâll be offered a variable APR between 7.9% and 25.9% (accurate as of January 2021).
Once youâve secured a line of credit, you can link your credit card accounts and let Tally start making payments for you. The app will automatically make payments based on its algorithm to try to save you as much on interest as possible and pay down your debt quickly.
Tally only makes payments to credit cards on your behalf if it can save you money on interest. That means if you have any cards with a lower interest rate than your Tally line of credit, the service wonât make payments on those cards. (Note: Tally always makes the minimum payment on your card. Read more on late fee protection later.)
Subscribe to get the week’s most important news in your inbox every week.
By providing my email address, I agree to CreditCards.com’s Privacy Policy
Your credit cards journey is officially underway.
Keep an eye on your inbox—we’ll be sending over your first message soon.
In response to the coronavirus pandemic, major credit card issuers are offering relief to their customers.
Even though many places around the country are open, the pandemic continues to impact the U.S. economy. Workers are still at risk of being laid off or facing reduced hours or pay.
“This is a rapidly evolving situation and we want our customers to know we are here to provide assistance should they need it,” Anand Selva, chief executive officer of Citi’s consumer bank, said in a statement in Spring 2020.
At the same time, scammers are now trying to take advantage of coronavirus concerns by sending out fake emails about the virus that are designed to steal consumers’ personal and financial information or to infect their computers with malware.
Financial strategies if you’re self-employed
How to manage your credit cards during the coronavirus outbreak
Coronavirus: What to do if you’re unemployed and have credit card debt
What to do if you’re struggling to pay your credit card bills
Many credit card issuers are allowing customers to opt into financial relief programs online. These programs are a convenient way to access short-term relief. But it could come with a long-term cost as many cardholders will continue to see interest accrue. With the average credit card interest rate sitting at 16.05%, cardholders might find more cost-effective relief through other options.
Here’s what issuers are currently offering:
American Express
Cardholders who are having difficulties can get assistance through American Express’s financial hardship program. Eligible cardholders have the option to enroll in a short-term payment plan, which provides relief for 12 months, or a long-term plan, which can provide relief for either 36 or 60 months.
Under both options, you will receive lower interest rates, plus waived late payment fees and annual fees. But you might not have access to certain card benefits and features.
If you enroll in the short-term plan, you might be able to continue putting new purchases on the card but with a reduced spending limit. If you are participating in the long-term plan, you will not be able to use the card.
Amex will report participating cardholders to the credit bureaus as current, assuming they comply with the program’s rules. But the program’s terms do offer some important caveats: Amex will inform the credit bureaus that you are enrolled in a payment assistance program (if you’re in the long-term plan). And under both plans, Amex will report that you have a lower credit limit.
While these factors do not have as much of an impact on your credit score as a delinquent account does, it could still signal to other lenders that you might be having some financial hardship.
Bank of America
Bank of America cardholders who have trouble paying credit card bills can request a credit card payment deferral by calling the number on the back of their card.
To qualify for payment assistance, cardholders must be carrying a balance, according to the website.
Bank of America sent an email to Preferred Rewards members in May 2020 stating that the company had temporarily suspended the annual program review process. Members whose assets dropped below the regular threshold to keep their status would continue to qualify for program benefits. It is unclear if Bank of America is still suspending this program.
Barclays
Barclays urges credit card account holders to request payment relief online. As of May 4, 2020, the bank is granting payment relief for two statements, but interest will continue to accrue.
Capital One
“We understand that this is a time of uncertainty for many people, and we know that there may be instances where customers find themselves facing financial difficulties. Capital One is here to help and we encourage customers who may be impacted to reach out to discuss how we might be of assistance,” the bank said in a statement.
In a March 26, 2020 update, Chairman and CEO Rich Fairbank confirmed that they are offering waived fees and deferred payments on credit cards for some cardholders.
Because each customer’s situation is different, the bank encourages customers to contact it directly. To contact Capital One customer service about an existing account, call (800) 227-4825.
See related: How to clean your credit card
Chase
Previously, Chase Bank stated that customers will be able to “delay up to three payments on your personal or business credit card” if needed, with interest continuing to accrue. The website currently does not specify how many payments cardholders can defer.
It also stated that active duty military members who are responding to a disaster might have access to additional benefits. Servicemembers can call the bank for more information.
In a letter to shareholders, the company’s CEO, Jamie Dimon, also promised to not report late payments to the credit bureaus for “up-to-date clients.”
See related: Chase offering limited-time bonus on food delivery for some cardholders
Citi
Citi customers who have been impacted by the coronavirus pandemic might be eligible for assistance. Previously, the bank was waiving payments and late fees for two consecutive billing cycles. However, Citi has ended its pandemic assistance program.
“Due to a significant and steady decline in enrollments, our formal COVID-19 assistance program has concluded and we will focus on providing assistance options to those customers financially affected by COVID-19 on a case-by-case basis. We continue to closely monitor the situation and will evaluate additional actions to support our customers and communities as needs arise,” a spokesperson for Citi said in an email.
During the bank’s pandemic assistance program, interest continued to accrue, but accounts that were current at the time of enrollment were not be reported as delinquent.
Discover
Discover will be extending relief to qualified customers who are experiencing financial difficulty caused by the spread of COVID-19.
“We encourage them to contact us by calling and are directing them to www.discover.com/coronavirus for phone numbers for each product line and other FAQs,” Discover said in a statement earlier this year. “We also can provide relief through our mobile text app, which connects a customer directly with an agent.”
Discover it Miles cardmembers can also put their miles towards their bill – including their minimum payment.
See related: What to do if you can’t pay your business credit card bill
Goldman Sachs
Apple Card customers can enroll in an assistance program. Previously, cardholders could waive payments without accruing any interest. The website currently doesn’t specify if this is still the case.
Key Bank
Cardholders can defer payments for three billing cycles. Though interest will continue to accrue, enrolled cardholders will not receive late fees, and their accounts will be reported as current, as long as accounts were not delinquent at the time of enrollment.
Synchrony
Synchrony is extending relief to customers experiencing financial hardship. The company’s website previously stated that this could include payment relief for up to three statement cycles, while interest would continue to accrue. The website currently offers no specifics about what the issuer is prepared to offer.
Truist (formerly SunTrust and BB&T)
Previously, Truist offered payment relief assistance to customers with personal and business credit cards, among other products. As of April 14, it was willing to delay payments for up to 90 days. The website currently offers no specifics about what the issuer is prepared to offer.
Wells Fargo
Previously, impacted cardholders could defer monthly payments for two consecutive billing cycles. The company’s website currently does not specify what assistance cardholders can expect to receive.
See related: Coronavirus stimulus legislation doesn’t suspend negative credit reporting
ultimate guide to coronavirus limited-time promotions for more offers designed to help cardholders maximize rewards amid the coronavirus pandemic.
Business credit cards
If you are a small-business owner and cash is not flowing and bills are piling up, the most important thing to do is contact your card issuer.
Some banks are also providing assistance in case you can’t pay your business credit card bill.
Another coronavirus complication: Scams
As consumers wrestle with the impact of the coronavirus, scammers are trying to take advantage of the situation.
In a June 2020 public service announcement, the FBI warned that the increasing use of banking apps could open doors to exploitation.
“With city, state and local governments urging or mandating social distancing, Americans have become more willing to use mobile banking as an alternative to physically visiting branch locations. The FBI expects cyber actors to attempt to exploit new mobile banking customers using a variety of techniques, including app-based banking trojans and fake banking apps,” the PSA warns.
Scammers might also be capitalizing on health and economic uncertainties during this time. In one such scam, cybercriminals are sending emails claiming to contain updates about the coronavirus. But if a consumer clicks on the links, they are redirected to a website that steals their personal information, according to the Identity Theft Resource Center (ITRC).
Identity theft in 2020: What you need to know about common techniques
Bottom line
The outbreak of a disease can upset daily life in many ways, and the ripple effects go beyond our physical health. Thankfully, many card issuers are offering relief. If you’re feeling financially vulnerable, contact your credit card issuer and find out what assistance is available. And while data security may seem like a secondary consideration, it’s still important to be vigilant when conducting business or seeking information about the coronavirus online.
