How do credit card refunds work?

Whether the jacket you loved in the store looks weird at home or you no longer need the gift you bought, you're bound to return an item you've purchased at least once in your life.

If you bought your item with cash, the cashier will refund the same amount you paid. But how do credit card refunds work?

Here's what you need to know about credit card refunds.

What is a credit card refund?

When you return an item, the merchant typically issues your refund as a store credit or returns the funds to the original payment method, depending on the store's return policy. If you choose to receive your refund via the original payment method and you paid with a credit card, you'll receive a refund to your credit card account.

Some credit cards may provide perks that extend the return window for purchased items, subject to terms and conditions. This commonly comes in the form of extended warranty protection or as a benefit for a store card.

Related: The top 7 credit cards to maximize large purchases

Can you get a refund on a credit card?

If the merchant allows a refund to your original payment method, you'll get the money on the credit card you used to make the purchase. Even if the merchant terms prevent you from receiving a refund, you may still be able to get back the amount you paid if your card has return protection.

For instance, if you paid with the Chase Sapphire Reserve® (see rates and fees) and the merchant doesn't take the item back, the card's return protection allows you to receive a credit card refund of up to $500 on an eligible item (up to $1,000 per calendar year) within 90 days of purchase.

Related: Your complete guide to shopping protections on American Express cards

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How do credit card refunds work?

When you make a purchase with your credit card, you allow the credit card company to pay for your purchase, and you pay them back when you pay your statement balance.

When you make a return, the credit technically goes to the credit card issuer, and your balance will adjust when the issuer processes your credit card refund.

Here, my account shows the purchases I've made (the positive numbers) and a return that has been processed and deducted from my account balance.

However, you are responsible for paying the purchase amount if your payment is due before the refund is processed. Once the return is processed, your balance will be adjusted for the following billing cycle. If you're not sure whether a return will process in time before your statement balance is due, pay off the charge anyway, just to be safe.

Related: Can a merchant charge a fee for paying by credit card? Here's what you should know

How long does a credit card refund take?

Credit card refunds can take anywhere from a day to a few weeks, depending on the merchant and your credit card company. If you have a significant return that you want to clear before your payment is due, make the return as early as possible.

Ideally, allow at least five business days between your return date and the end of your billing cycle to increase the chances that your credit card refund will be processed before your payment is due.

Related: How long does it take to receive statement credits from Amex, Capital One, Chase and Citi?

What happens to my credit card rewards when I get a refund?

Unfortunately, you lose the rewards you earned on a purchase when you return it. Like your account balance, your rewards balance will adjust when your return is processed.

Similar to my account balance, my rewards balance shows the returned purchase points deducted from my rewards account.

If you want to keep your rewards, you can request the merchant give you a store credit rather than a refund.

Related: Can you close a credit card with a negative reward balance?

Bottom line

When you return something you purchased with your credit card, the purchase amount is subtracted from your balance. A credit card refund can take a few days or even weeks to process, though, and you'll be on the hook for the purchase amount if your payment is due before a return is finished processing.

Related: Why nearly every purchase should be on a credit card