What happens to credit card rewards after you return a purchase?

From shopping splurges to products or services that just didn’t cut it, there are many reasons you may want to return a purchase made with your credit card. If you purchased with cash or a debit card, the returns process is simple enough – you return the product and then your money is refunded immediately.

But what about returns when you use your credit card? Now, you don’t only have to think about the money reimbursed, but also about the rewards you earned on your initial purchase. Unfortunately, if you get a refund for a purchase, you won’t get to keep the rewards you earned.

Here’s what you need to know about what happens to credit card rewards when you make a return.

What to expect with refunds to your credit card

The amount of time it takes to get a refund for purchases made on your credit card depends on the merchant you purchased the item from and your credit card issuer. If you bought an item that is only eligible for store credit upon return – or doesn’t allow returns at all – there isn’t anything your credit card company can do to facilitate that return.

If the company does allow returns, the timeline for a refund typically ranges from a few days to a week or more. Even once a merchant processes a refund, the actual time it takes for the refund to show up in your account is set by your credit card issuer.

When you make a return, the money that is refunded will apply to your outstanding balance, not refunded to you directly. This means that if you return a $150 pair of shoes while having a balance of $500, your new statement will reflect a balance of $350.

However, if you return the same pair of shoes after you have already paid off your balance in full you could end up with a negative balance. While this may sound like a bad thing, it means that the credit card company owes you money to cover the charges you make until the negative balance is back to zero. So if your account balance was $0 at the time of the refund, your balance would become +$150 (essentially a credit), which would decrease as you make purchases.

Can you keep credit card rewards after you return a purchase?

So, you’ve decided you didn’t love the shoes you bought or that the new mattress you purchased is too firm. You can get the money back, but what about the rewards you’ve earned?

Unfortunately, you won’t get to keep them.

As disappointing as this might be – whether it’s cash back, points or miles – credit card issuers across the board will deduct rewards from your account once the refund is processed.

If you have used the rewards you earned before you made the refund, you may end up with a negative rewards balance or negative points. Unlike a negative account balance, where the issuer owes you, a negative rewards or points balance means you owe the issuer rewards. Rewards you earn on ongoing purchases will “pay off” the rewards deficit until you get back to zero.

There’s a loophole to let you keep your rewards

Because of the way that credit card transactions are processed, wherein the merchant is paid by the credit card issuer on your behalf and then the credit card company expects you to pay them back, there is a loophole where you can both return a purchase and also keep your rewards.

If you purchased an item that is available for refund in the form of store credit or postponement in the case of services, you can keep your rewards for that purchase. As far as the credit card company is concerned, it has paid the merchant and you have paid them. Issuers will only deduct your rewards if they have to process an actual refund.

Bottom line

When it comes to making a purchase with a credit card, the transaction time takes less than a second to process. When it comes to returns, however, the process can be a little more lengthy. If you are planning to make a return, you likely won’t be able to keep the rewards on your purchase unless you consider options like store credit.