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 merchant takes the payment from the credit card issuer. The issuer pays the vendor and adds it to your credit card balance – a running total of all the purchases you’ve made in this way.
The refund process works like this in reverse: when the vendor agrees to a refund, the money is returned to the credit card provider, who will then reduce the balance you owe.
This is why most retailers prefer not to give cash refunds when you use a credit card, as your money is never actually used during either transaction.
How do I claim a refund on something I've purchased with my credit card?
Claiming a refund on something you’ve purchased with your credit card should be straightforward, particularly if you haven’t used the goods or services you bought.
Contact the retailer and provide them with the details of the credit card you used to make the purchase. Have your receipt to hand, as well as details of their return policy and your recent credit card transactions. If you don’t have your receipt, showing another kind of proof of purchase (such as the credit card statement) should suffice.
If the retailer agrees to the refund request, they will refund the amount directly to your credit card issuer who will adjust your card balance and credit limit to reflect this. It means that any outstanding credit card balance will be reduced.
If the retailer does not respond to your request or refuses to issue a refund, you may still be able to get your money back. Contact your credit card company and tell them:
The details of what you bought and how much you paid. Again, try to provide a receipt or other proof of purchase.
Explain that you’ve not been able to get a refund from the retailer and include details of any correspondence.
Stress you are making a claim for your refund under Section 75 of the Consumer Credit Act and keep a record of the email you’ve sent.
Your credit card company is obliged to look at your case and issue a refund – by making a chargeback from the seller – if they agree you have wrongly been rejected.
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?
Credit card refunds usually take between three and seven days, but this can vary depending on the merchant, the billing cycle and your credit card provider.
Depending on the merchant’s policy, most will process a refund instantly, but some take a few extra days, depending on which business days the company operates.
Likewise, each provider has their own process to follow before the refund is credited to your card balance.
Of course, this only applies to refunds which both parties – the buyer and the seller – have agreed on. A refund could take much longer if your merchant disputes it. Unfortunately, billing and fraud disputes can take months.
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.
How does Section 75 help with refunds?
Section 75 is a very useful UK credit card consumer purchase protection law that helps make credit cards one of the best ways to make larger purchases.
It effectively means that your credit card issuer is legally obliged to take the same responsibility as the retailer if a purchase goes wrong.
As such, you can’t be made to pay off debt (i.e. your credit card balance) for goods or services that you either didn’t receive or which weren’t up to scratch.
This is a powerful piece of purchase protection legislation for purchases worth between £100 and £30,000, and it makes credit cards a good option for more expensive purchases.
You won’t end up out of pocket, for instance, if you buy a car from a dealer which goes bust before you can take delivery. Even better, Section 75 return protection applies to the full amount if you put just £100 of the purchase onto a credit card.
If you need to invoke Section 75, get in touch with your credit card provider, who will be legally obliged to take things further. Our guide to credit card protection provides more information.
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?
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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.
