How do credit card refunds work?
Key takeaways
A credit card refund occurs when a cardholder is reimbursed for a purchase made using a credit card
If the retailer denies you a refund, the credit card company will review your case and reimburse you if they agree you were wrongly rejected
Each provider follows its own process before crediting the refund to the cardholder’s card balance
Under Section 75, the cardholder isn’t liable to bear the cost if goods or services are unsatisfactory or undelivered
When you’re making a purchase, paying with a credit card works in the same way as using a debit card or cash – at least at the point of transaction, meaning you get what you paid for, and the retailer gets their money.
However, you do not actually spend your own cash when you use a credit card. Instead, the money is borrowed from the card company, which you pay back at the end of the month, either in part or in full.
This makes the process of getting a refund slightly different. Here’s what you need to know.
What is a credit card refund?
A credit card refund is when you are reimbursed for a purchase made on your credit card.
The refunded amount might come directly from the retailer or you might need to go through your credit card company using Section 75 of the consumer credit act.
The refund will then usually be deducted from your current credit card balance i.e. the amount you owe.
What’s the difference between a refund, chargeback and Section 75?
These terms are often confused, but they refer to different ways of getting your money back.
A refund is when the retailer voluntarily returns your money, usually because you’ve cancelled an order or returned an item.
A chargeback is a card scheme dispute process run through Visa, Mastercard or American Express that allows your card provider to try to recover the money from the merchant’s bank, but it is not a legal right.
Section 75, on the other hand, is a legal protection under the Consumer Credit Act that makes your credit card provider jointly responsible with the retailer for certain qualifying purchases.
How does a credit card refund work?
When you buy something with a credit card, the retailer receives the payment from your card provider and the amount is added to your credit card balance.
If the retailer agrees to a refund, the money is returned to your card provider. The refund is then credited to your credit card account, reducing the amount you owe.
For example, if you owe £500 on your card and receive a £100 refund, your balance would usually fall to £400. If you've already paid off the purchase, the refund may instead leave your account with a positive balance.
How do I claim a refund on something I've purchased with my credit card?
Claiming a refund should usually start with the retailer.
Contact the retailer and explain why you want a refund. Have your receipt or other proof of purchase to hand
Check the retailer's returns policy to see whether you're entitled to a refund and whether there are any conditions or time limits
If the retailer agrees, it should process the refund back to the credit card you used to make the purchase
Check your credit card statement to make sure the refund has been applied
If the retailer refuses your request or doesn't respond, you may still have options.
For a qualifying purchase, you may be able to make a Section 75 claim with your credit card provider.
You'll normally need to explain what you bought, how much you paid, what went wrong and what you've done to try to resolve the problem with the retailer. Keep copies of receipts and any correspondence.
Faulty goods vs changing your mind
Whether you're entitled to a refund depends partly on why you want to return the item.
If goods are faulty, not as described or don't do what they're supposed to, you have legal rights under consumer law.
Depending on the circumstances, you may be entitled to a repair, replacement, refund or price reduction.
If you simply change your mind about something bought in a shop, you don't generally have a legal right to a refund. The retailer may offer refunds or exchanges as part of its own returns policy.
Different rules apply to many purchases made online, by phone or by mail order. You generally have 14 days from receiving the goods to tell the retailer you want to cancel, followed by another 14 days to return them.
There are some exceptions, including certain personalised, perishable and sealed goods.
What if my claim isn’t successful?
If you attempt to use Section 75 but are still unable to get your money back, you can contact the Financial Ombudsman to review your case.
The Financial Ombudsman Service is an impartial and free service used to settle disputes between consumers and businesses.
They’ll examine your case from both sides to reach a decision they think is fair. You still might not get your money back, though.
How long does a credit card refund take?
A credit card refund can take several working days to appear on your account.
A credit card refund usually takes between 3 and 14 business days to appear on your account after the retailer processes it.
Fastest: Some refunds show up within 24 to 48 hours
Standard: Most clear within 3 to 7 business days
Longest: Some card issuers or complex returns can take up to
30 days or 1 to 2 billing cycles
However, the exact timeframe depends on the retailer, when the refund is processed and your credit card provider.
If a retailer tells you it has processed your refund but you can't see it on your statement, give it time to appear before contacting your card provider.
If the refund still hasn't appeared after the expected timeframe:
Ask the retailer to confirm when the refund was processed.
Keep any refund confirmation or reference number.
Contact your credit card provider if necessary and ask it to trace the refund.
A refund agreed between you and the retailer should generally be quicker than a disputed transaction, which can take longer to resolve.
If you do need to open a billing or fraud dispute, contact your card issuer quickly. It may be able to initiate a chargeback through the card scheme to recover the funds from the merchant’s bank.
What happens if a refund puts my credit card balance in credit?
If you've already paid off your credit card balance when a refund is processed, the refund can leave you with a positive balance.
For example, if your card balance is £0 and a retailer refunds £150, your account could show a £150 credit. This means the card provider owes you £150 rather than you owing it money.
You can usually leave the money on the card and use it towards future spending. Alternatively, contact your card provider and ask whether it can transfer the positive balance to your bank account. The process can vary between providers.
What happens if I get a refund on a cancelled credit card?
If the card you used to make a purchase has since been cancelled, contact the card provider and explain that you're expecting a refund.
The provider will tell you how it can return the money to you. You may be asked to provide details of the original transaction or another account to which the funds can be returned.
You generally can't ask a retailer to send a credit card refund to a different card simply because the original card has been cancelled.
Does a credit card refund reverse interest or fees?
A refund reduces the balance on your credit card, but it doesn't necessarily reverse interest or fees that have already been charged.
For example, a card provider may have already charged interest or a fee before the refund was processed. Whether any of these charges are adjusted will depend on the circumstances and your card provider's terms.
If you're unsure, check your statement or contact your card provider and ask how the refund has affected your interest and fees.
What happens to interest while a credit card transaction is disputed?
A disputed transaction isn't necessarily removed from your balance while your card provider investigates it.
The way interest and payments are treated can depend on the type of dispute and your card provider's terms.
If the disputed amount remains on your statement, check with your provider whether you should continue making payments while the investigation is ongoing.
Don't simply stop making your credit card payments because you've raised a dispute. Unless your provider tells you otherwise, continue to meet your payment obligations, including at least the minimum payment, to avoid potential missed-payment consequences.
If you're unsure what you owe while a dispute is being investigated, contact your card provider.
How does Section 75 help with refunds?
Section 75 provides legal protection for certain purchases made using a credit card.
If you buy something costing more than £100 and up to £30,000, your credit card provider can be jointly responsible with the retailer if there's a breach of contract or misrepresentation.
This can include situations where goods or services aren't supplied or aren't as described.
You don't necessarily have to pay the whole purchase price by credit card. Paying part of the cost, such as a deposit, can be enough to qualify for Section 75 protection if the purchase meets the other requirements.
If you need to make a Section 75 claim, contact your credit card provider and explain:
What you bought
Where and when you bought it
How much it cost
What went wrong
What you've done to try to resolve the issue with the retailer
Keep copies of receipts and any correspondence with the retailer and your card provider.
Section 75 is different from chargeback, which is a card scheme process rather than a legal right.
What if I paid by debit card?
You can also receive refunds for purchases made with a debit card. In the first instance, contact the retailer and ask for a refund.
If the retailer won't resolve the problem, you may be able to ask your bank to use chargeback to try to recover the money.
Chargeback isn't the same legal protection as Section 75 and has its own rules and time limits.
Personal Finance & Insurance Expert
Our expert says
One of the top reasons for taking out a credit card is the extra protection it gives you for purchases. Imagine buying an expensive gift for a loved one and it arrives damaged, but the retailer does not want to accept fault. It's a frustrating situation that can be rectified if you’ve used a credit card and can claim a refund in confidence.
Other useful guides
For more information about credit and debit cards, see our guides, including:
Guide to credit card protection
What type of credit card is best?
Compare credit cards with MoneySuperMarket
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Frequently asked questions
Am I protected if I pay by credit card?
Yes, credit card purchases over £100 and under £30,000 are protected by Section 75. This consumer protection means your credit card provider shares equal responsibility with the seller if there’s an issue with what you bought, or the company you’ve purchased from goes bust.
Do you have to use the same card for a refund?
Yes, funds can only be refunded to the card that was used to make the payment. This should be made clear in a retailer’s returns policy.
Do credit cards offer more protection than debit cards?
Credit cards provide more legal protection than debit cards, as Section 75 makes your card provider legally responsible for any purchases over £100 and under £30,000 that have gone awry. Debit card purchases may be covered by chargeback, however this isn’t legally binding.
What happens if I get a refund to a cancelled credit card?
If you receive a refund onto a credit card that you’ve cancelled, the issuer should send you a cheque for the purchase amount. However, there’s not a lot of regulation governing this kind of situation, and many issuers can end up dragging their heels on releasing the funds. Additionally, you cannot get a credit card refund to a different credit card than the one you used, or to a debit card.
What happens if I get a refund paid to a credit card which has no outstanding balance?
If you receive a refund onto a credit card that you’ve cancelled, the issuer should send you a cheque for the purchase amount. However, there’s not a lot of regulation governing this kind of situation, and many issuers can end up dragging their heels on releasing the funds. Additionally, you cannot get a credit card refund to a different credit card than the one you used, or to a debit card. If you receive a refund to an active credit card, you may well end up with a negative balance, which means that the credit card provider will technically owe you money. You can then ask your card provider to pay this balance back into your bank account.
Does interest or fees change when a refund is applied?
When a refund is applied to your credit card, it will reduce your outstanding balance, but it does not automatically reverse all associated costs. Any interest that has already been charged is usually not refunded, and fees such as cash advance charges or foreign transaction fees are also typically not reversed. The refund simply reduces what you owe going forward rather than undoing previous charges.
Can I get a refund on a debit card purchase?
Yes, you can receive a refund on a purchase made with a debit card. It works in a similar way to a refund from a credit card. You should return the item to the retailer with proof of purchase, ideally your receipt, and they can issue the refund for the purchase amount.
If they refuse a refund or ignore your request you may be able to use what’s known as a chargeback. This works in a similar way to a credit card refund but doesn’t offer the same level of legal protection as Section 75. Our guide to What is chargeback and how does it work? explains more.
Author
Tim Heming
Personal Finance Expert
Tim Heming is a journalist and editor who has written about personal finance for national newspapers and consumer websites for 15 years. Tim enjoys providing no-nonsense information to help consumers...
Reviewer
Alan Cairns
Senior Content Editor
Alan breaks down money, home, and energy topics into plain English to help you save money. Ask him about pound cost averaging or Balkonkraftwerk.
