Credit Building Tips

What Happens If You Get a Refund on a Credit Card With 0 Balance?

Shaun Connell
September 1, 2023

If your credit card account is paid off in full and you initiate a refund, how does it work? What happens if you get a refund on a credit card with a 0 balance?

Credit card refunds don't work in the same way as cash or debit card refunds because it's actually the card issuer that paid the merchant or vendor, not you. This means that you won't receive the refund in cash, but instead as a credit to your account.

Solution icon If you have paid off your balance in full before a refund is issued, you will have a negative balance on your account. The next time you make a purchase using your card, this credit will be used first. If the refund is for a substantial amount of money or you don't intend to use that credit card again, you might be able to ask for the money to be sent as a check.

Let's take a closer look at what you need to know about credit card refunds and what to expect when you have a negative balance on your account.

What Is a Credit Card Refund?

If you buy something using a credit card and then later return it, you won't be able to get your money back in cash. What will happen instead is that you'll receive a credit on your account. The credit that you'll receive will be equal to the amount of the original purchase.

person buying something they will return and get refund on credit card

Typically, the refund process will start once the merchant has agreed to accept your return and issue you a refund. However, if the person you bought the item or service from refuses to give you a refund or is unable to, it's possible you can utilize your return protection.

In order to determine whether or not your circumstance qualifies for return protection, you'll want to contact your credit card issuer. They will be able to help you understand the protection policy associated with your card.

How Credit Card Refunds Work

Understanding how credit card refunds work requires that you first understand the steps involved in processing a transaction.

When you buy something using your credit card, you aren't actually the one that is paying the merchant. Instead, the credit card company is.

getting refund on credit card with no balance

Once the purchase has been made, you'll see your available balance go down on your credit card account. When you make payments to pay down your credit card balance, you're paying the credit card company back for the money they lent you for purchases.

Also involved in the process are credit card networks. These are companies that act as a mediator between merchants and credit card issuers in order to process payments. Before you can receive a refund for your purchase, the merchant has to send the refund to the credit card company.

It is for this reason that you can't use another payment method to receive a refund for a credit card purchase (i.e., receiving the refund in cash or putting it on another card). Similarly, this is why it can often take a number of days to receive a credit card refund.

How Long It Takes to Get a Credit Card Refund

It will typically take several days in order to see the credit appear on your account after a refund. This is because the return has to go through a specific process via the credit card networks.

There are three key methods that will determine precisely when you can expect your refund to show up, which are:

  1. The credit card issuer
  2. The merchant
  3. The return method

For example, you might find that you receive credit for your refund more quickly if you are returning the item in person. In general, though, it will take between five and fourteen business days to see the credit show up on your account.

If you want to have access to the refund money as quickly as possible and you expect to make another purchase from the same merchant, one alternative is to ask for store credit. However, it's important to understand you will still owe the credit card issuer the money you have used for the original transaction.

What Happens If You Get a Refund on a Credit Card With 0 Balance?

Let's say you made a purchase on your credit card, and you have since paid down the account balance to $0. If you then go to return that item, what will happen to the balance on your account?

Usually, this will result in having a negative balance on your account. Basically, the credit card issuer will owe you money rather than the other way around. The next time you make a purchase, this negative balance will be used first.

For example, let's say you have a $0 balance, and you return an item with an original purchase price of $50. Once the refund is credited to your account, you will have a balance of negative fifty dollars.

If you were then to purchase something else for $50 using that same card, your balance would return to $0, and you wouldn't owe the credit card issuer any money. If you were to purchase something else for $100 using the same card, your balance would be $50 after applying the negative balance.

While this usually isn't a problem so long as you regularly use this particular credit card, you might be wondering what you can do to have access to your funds if you don't plan on using the card anytime soon. For a particularly large negative balance or a card you rarely use, you can ask the issuer to send you a check in the amount of the negative balance.

What Is a Negative Credit Card Balance?

The word 'negative' in the term 'negative credit card balance' makes it sound like it's a bad thing. In actuality, having a negative credit card balance means that you owe less than nothing to the credit card company-- they actually owe you money.

This can occur for a few different reasons, the most common of which are:

  1. You overpaid your outstanding balance
  2. You initiated a return that refunded your account
  3. You earned a statement credit through rewards
  4. You had fees canceled or waived
  5. You had a fraudulent charge removed after already paying for the transaction

There's nothing wrong with having a negative balance on your card. The next time you use your card, this credit will go toward the purchase price before you owe the credit card company any more money.

However, you can request a deposit if you don't want the credit sitting in your account unused. Usually, a credit card issuer will be willing to send you the money through direct deposit to your bank account, a check, or a money order.

Credit Card Refund FAQ

Before I sign off, let's take a look at some of the most commonly asked questions about credit card refunds.

What Is Return Protection on a Credit Card?

Some credit card issuers offer credit card return protection. This is a perk that allows cardholders to make a return even when the merchant won't allow it. Even if the retailer does allow returns, having a card with return protection can extend the period of time you are eligible to return an item.

This is, unfortunately, a perk that is less and less common. Many issuers have recently been phasing out this type of benefit. For that reason, you don't want to assume that your card has return protection and instead should look closely at the details of your card agreement and benefits.

What's the Difference Between a Refund and a Chargeback?

Money can be returned to a cardholder through both refunds and chargebacks. However, these two processes occur for different reasons and aren't exactly the same in their process.

  • Credit card refunds: These are initiated by the vendor or merchant that originally received the payment. The amount of money being refunded is credited back to your account and will usually show up as a statement credit.
  • Credit card chargebacks: These are initiated by the cardholder (aka, you!) in order to dispute a transaction. This is normally something that will happen when you think a transaction might have been fraudulent or unauthorized. This is also a method you can use when the goods or services you receive do not fit the description offered by the merchant.

If you want to return something and receive credit on your account, you will have to go through the merchant. There are typically parameters you have to follow in order to return an item for a full refund, and these are set by the merchant themselves.

If you want to get a credit card chargeback, you will go through your credit card issuer. To do so, you'll have to dispute the particular transaction with your credit card company. They will then initiate a chargeback with the bank of the merchant, and the merchant will have to prove that they provided the described product or service to you. If this evidence can't be provided, you will usually be granted the chargeback and see the disputed amount show up as a credit on your account.

When Should I Use the Chargeback Process?

When you initiate a chargeback, you are disputing a purchase that has already been charged to your credit card account. Rather than being paid directly from the vendor or the merchant, a chargeback is processed by your bank or credit card issuer.

There are a number of different reasons you can choose to use the chargeback process. These include:

  • You purchased an item that was defective or damaged upon arrival
  • There are fraudulent or unauthorized charges on your account
  • You never received an item you purchased
  • An incorrect amount was charged by a merchant
  • Charges were duplicated by a merchant

Going through the chargeback process can actually be pretty time-consuming. The merchant can end up owing the credit card company if the dispute is ruled in the cardholders favor. For this reason, many merchants prefer to simply have generous return policies rather than facing the chargeback process while also potentially alienating a customer.

Are There Any Downsides to Credit Card Refunds?

Being refunded after you return an item or are displeased with a service is a fairly straightforward process. For most people, receiving a credit on their credit card balance is just as good a method of receiving their refund as any other.

That being said, there are a few disadvantages to be aware of when initiating a refund for a purchase made with a credit card.

You'll Most Likely Lose the Rewards You Earned

Do you use your credit card rather than other payment methods in order to benefit from the points or perks you earn? If so, you'll want to know that you'll likely lose the points that were earned on the particular purchase if you initiate a return.

As the cardholder, you'll be expected to return any reward points that are associated with the money used for the purchase. This doesn't just have to do with cash back or travel miles, either-- it also applies to sign-up bonuses and other spending-based incentives.

For example, let's say that you have to spend $2000 in the first four months of opening your account in order to receive a promotional sign-on bonus. If you make a $500 purchase toward the end of this period so that you qualify for the bonus, you'll want to understand that you'll lose the bonus if you were to return the same $500 purchase.

You Probably Won't Get Reimbursed For Foreign Transaction Fees

If you are returning a foreign purchase, it's worth understanding that you'll probably get stuck with any foreign transaction fee. The reason for this is that it costs your credit card issuer money when you make an international purchase.

Credit card companies need to process international purchases through currency market purchases. In order to allow you to buy the item or service originally, they took on additional costs.

The specific terms, however, will ultimately vary depending on your credit card issuer and the card itself. It never hurts to ask, at the end of the day, as it's possible your issuer will be willing to send you a refund for foreign transaction fees via statement credit. You will generally have an easier time of this if currency values haven't fluctuated significantly since the time of purchase and if you swiftly made the return after purchase.

What Do I Do If a Merchant Won't Issue a Refund?

When you purchase a product or service that you want to return, the first step is to contact the company that sold it to you. Ask them if they will reverse the charge. Depending on the circumstance, they might ask that you return the product to them.

If the merchant's response isn't satisfying to you, it's possible you will be able to dispute the charge. To dispute a charge, you'll want to contact the credit card company associated with the account you used to make the purchase.

This process is known as a chargeback. Card issuers will sometimes offer protections if you received a defective item or if you otherwise didn't receive the goods or services you purchased.

It's also possible that you may be granted the right not to pay the remaining balance on a purchase if you only paid part of a bill for a product or service that you purchased with the card. In order to be considered for this type of chargeback, you will typically need to meet the following criteria:

  • You have already tried to resolve the issue with the company you purchased the product or service from in good faith
  • The purchase must have been made in your home state or at least within one hundred miles of your personal address
  • You made the purchase using your credit card
  • The cost of what you purchased is more than $50
  • You haven't fully paid for the purchase yet

Does a Credit Card Refund Count as a Payment?

Another important question to answer is whether credit card refunds count as a payment. After all, if you have a minimum payment of $50 and you received a statement credit for $50 due to a refund, you're probably wondering whether you're still on the hook for your minimum payment this month.

Usually, getting a refund to your credit card counts as an account credit doesn't count toward your minimum payment. Though it would be nice if it was viewed as a payment by the issuer, this is not the case.

This means that you'll still be responsible for making your minimum monthly payment even if you receive a refund equal to or larger than that amount. Otherwise, you could get hit with a late payment fee and even a mark on your credit report if you don't quickly remedy the issue.

Will a Credit Card Return Impact My Credit Score?

When you receive a credit card refund, it will usually help to reduce your total outstanding balance. This means that a refund is generally a positive thing for your credit score. There are a number of factors that impact your credit score, but one of the most significant factors is "amounts owed." When either your FICO score or VantageScore is calculated, 30% of your score results from this category.

For example, let's say that you have a credit limit of $2,000 and the balance on your card is $600. This would mean you have a credit utilization ratio of 30%, which is just about as high as experts suggest you let your credit utilization get.

What happens, though, if you make a return and receive a $200 refund? This would mean that your balance goes down to $400, reducing your credit utilization to 20%. When it comes to credit utilization, lower is always better, and keeping your balances low in relation to your credit limit is a great way to maintain a healthy credit score.

Credit Card Refunds: Final Thoughts

If you initiate a return for a purchase you made with a credit card, the merchant will first have to agree to send a refund. Since it was actually the credit card company that paid the merchant on your behalf, the money will be sent to your credit card issuer, not directly to you. This means that you will end up with a credit on your account.

If you have already paid off your account balance in full, this will result in a negative balance. The next time you go to make a purchase, this credit will be used first before you start racking up a positive balance.

For some refunds, the dollar amount might be large enough that it isn't ideal for it to be sitting as a credit in your account. In these cases, you might be able to ask the credit card company to send you a check in the amount of the refund.

Similarly, if you don't plan to use that credit card in the near future, the issuer might be willing to send you the funds in cash. If they go unused for a certain amount of time, it's possible they will send you the check unsolicited.

Are you on a mission to improve your credit and increase the financial opportunities available to you? If so, make sure you check out our Credit Building Tips blog for more resources, guides, and helpful tips.

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Written By:
Shaun Connell
Shaun Connell is a personal finance and credit expert with a passion for helping individuals eliminate debt and improve their credit. He's enjoyed writing investing and financial content for over 15 years, with expertise in real estate, debt, banking, credit, and wealth building. His work has been seen by millions on the web.

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