A credit card is a widely used payment method where the user can use the card as long as there is a credit limit. Every month the credit card user has to pay the due bill and make the balance zero. Refund on a credit card is very common and if you receive a refund on your credit card then it will automatically deduct the outstanding balance on the card. If the credit card has zero balance then the refund will still be processed and it will make a negative credit balance. Here, the negative credit balance is not derogatory. When you will make a future purchase, the negative balance will automatically be removed.
What is a Credit Card Refund?
A credit card refund happens when you make a purchase using your credit card and then ask the merchant for a money return because you are not satisfied with the product. For an instant, you bought a shirt online worth of $50 and make the payment using your credit card. But, when you receive the shirt, you see that the quality doesn’t match the product description. Therefore, you returned the shirt and the merchant makes a refund to your credit card. The main difference between a credit card refund and a refund is, that when there is a credit card refund, you won’t receive any money. You will receive a credit to your credit card account.
How do Credit Card Refunds Works?
The working procedure for a credit card refund is quite simple. But to understand how credit card refund works, you must have a clear idea about how credit card payments work. When you make a payment using a credit card the fund doesn’t deduct from your bank account, instead, the credit card company makes the payment on your behalf of you. Every credit card has a credit limit. When you make a purchase your credit card’s limit decreases. If your credit card’s limit goes to zero then you won’t be able to purchase anything using the credit card. You have to pay the previous due to increasing your credit card’s limit. When you make transactions using your credit card, the transaction usually happens between the credit card issuing company and the merchant. So, when there is a refund to your credit card, the merchant will send the refund back to the card issuing company. Then the card issuing company will credit your account. This is one of the main reasons credit card refund requires 5 – 14 days to complete the process.
What Happens to a Refund on Credit Card with Zero Balance?
Getting a refund on a credit card with a Zero balance works similarly to if you overpay your credit card bill. When you overpay your credit card bill, the extra balance will remain on the credit card for spending. Similarly, when you get a refund on a zero-balance credit card, the balance will remain on your card for spending. Overpaying or getting a refund on a zero balance will make your credit card balance negative. For example, if your credit card balance is $1000 and you made the monthly payment then your credit card balance will be Zero. Now if you receive a refund of $200 then your credit card balance will be -$200. The negative balance on your credit card is not derogatory like a negative balance on your bank account. Having a negative balance on your credit card will allow you to purchase products or make online payments.
How Long it Takes to Complete a Credit Card Refund
Credit card refund takes more time than other types of refunds. This is because credit card refund transactions usually go through the credit card networks and this is a major reason credit card refund takes several times. The exact time to get a credit card refund varies from one credit card Company to another as well as the return method, merchant, etc. Considering all the facts it might take up to 14 days to get a refund on your credit card. Moreover, if the return is not processed within the closing date of the card then the refund won’t appear on the closing month’s statement. So, if you want an instant refund then you can ask for store credit; this will be the best solution for you.
FAQs about Refund on Credit Card with Zero Balance
Do refunds count as credit card payments?
No, refunds don’t count as credit card payments. If there is a refund on your credit card then it will increase your credit limit or make the credit card balance negative. However, the credit card company won’t consider it as a credit card payment.
Does a credit card refund affect your credit score?
No, a refund on your credit card won’t affect your credit score. This is because credit scores aren’t calculated based on refunds on your credit card.
Can I access the negative balance as a cash advance?
The answer to this question depends on your card issuing company. If the card issuing company allows you to take a cash advance from a negative balance then you will be able to do it. However, if the cardholder agreement doesn’t allow it then you won’t be able to withdraw cash advance from a negative balance.
Can I make a payment when my credit card balance is negative because of a refund?
Yes, you can make a payment when your credit card balance is negative. A negative credit card balance doesn’t mean you don’t have money/credit. It means your credit card account is overpaid and your account has more credit than your actual credit card balance.
Can you transfer the refund from the credit card to the bank account?
If the refund to your credit card makes your credit card balance negative then you will be able to transfer the refund amount from your credit card to your bank account.
References:
https://www.bankrate.com/finance/credit-cards/how-do-credit-card-refunds-work/
Last Updated on September 1, 2022 by Ana S. Sutterfield
