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Credit card refunds

How do credit card refunds work?

Getting a refund on your credit card isn't as hard as you may fear. Here's what you need to know about credit card refunds.

By Lucy Hancock

Published: 28 May 2021

Man using credit card to pay via a laptop

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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 vendor 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 lets you spread larger purchases out over a few months, and you can use it to tide you over until payday.

This makes the process of getting a refund slightly different – but only slightly. Here’s what you need to know.

How does a credit card refund work?

As explained, 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.

A refund 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.

What happens if your credit card is fully paid and you get a refund?

If you receive a refund for a larger sum than your current card balance, you can end up with what’s known as a ‘negative card balance’. This is anything but negative: it means the card issuer owes you money rather than the other way around. The negative balance will then be used to offset new purchases you spend on your credit card.

In some situations, you may end up with quite a large negative balance, perhaps if you’ve made a large purchase which you decide to return after paying your balance off. In these cases, you’re able to request a refund from your issuer, which will usually come in the form of a cheque.

You’re also entitled to request a refund if you overpay your credit card balance and end up with a negative balance.

A negative balance won’t negatively affect your credit score  as it’s not reported to credit agency.

How long does it take to get a refund?

Credit card refunds usually take between three and seven days. But the time depends both on the merchant and on your credit card provider. Most merchants will process a refund instantly, but some allow for a few extra days. 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 upon. A refund could take much longer if your merchant tries to dispute the refund. Billing and fraud disputes may take months.

If you do need to open a billing or fraud dispute, contact your card issuer at the earliest opportunity. They will be able to demand a chargeback from the vendor.

What happens if you 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 with the money. 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. In some cases, you may end up having to chase them for a few months before you get your refund.

Additionally, you cannot get a credit card refund to a different credit card than the one you used, or to a debit card.

Section 75 refunds

Section 75 is a very useful UK credit card consumer 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.

Effectively, this means 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 very powerful piece of legislation for purchases worth between £100 and £30,000, and it makes credit cards a good bet for larger buys. 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 applies if you put just £100 of the purchase onto a credit card.

The law in question is Section 75 of the Consumer Credit Act 1974. If you need to invoke it, get in touch with your credit card provider, who will be legally obliged to take things further.

Thinking about a new credit card?

If you’re looking for a credit card, MoneySuperMarket can help you find one that’s right for you. Our credit card Eligibility Checker will ask you a few questions about your personal and financial situation and what you want to use your credit card for to show you the cards you are most likely to be accepted for, without harming you credit score. You can sort the results by “Highest approval likelihood” to compare cards you’re more likely to be approved for.

You can also click “Full product details” in the card listing and scroll down to “Other features” to see if the card offers added purchase protection for free. You’ll also be able to see if the card comes with any rewards, fees or more.

Moneysupermarket is a credit broker – this means we’ll show you products offered by lenders. You must be 18 or over and a UK resident. We never take a fee from customers for this broking service. Instead we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.