Credit Balance Refund [What Is It on a Credit Card?]

The last thing we want to happen after doing some online shopping is to receive damaged items. If this happens to you, you can get a credit balance refund. What is a credit balance refund?

A credit balance refund refers to a type of reimbursement for paying more than your total credit card balance. This happens when you request a refund for a returned item you bought using a credit card.

The amount refunded by the merchant can cause overpayment to your credit card balance. In which case, you have the option to have it refunded.

Read on to learn more about a credit balance refund and how long it takes to get the refund.

What Is a Credit Balance Refund?

credit balance refund

A credit balance refund is a type of reimbursement for paying more than your total credit card balance. One of the reasons why this happens is when you request a refund for a returned item. The amount refunded by the merchant can result in overpayment to your credit card balance. In which case, you can have it refunded.

There are many reasons why we make refund requests due to returned items. It could be because of the merchant’s false advertising or misrepresentation. For instance, the teal curtain you ordered online turned out to be neon green when you received it. Another reason could be the rashes after using a popular skincare product that you bought.

If the items were bought using a credit card, you could claim your money back in the form of a credit card refund. This type of refund happens once you return an item you bought using your credit card. You then receive the refund by getting credit to your account.

To fully understand how a credit balance refund works, you must first know how a credit card purchase works. For every credit card transaction, there are always two types of companies. These are the following:

  • Credit Card Issuers
  • Credit Card Networks

Credit Card Issuers

Credit card issuers are the financial institutions that provide credit cards to clients. They are the ones that lend money to cardholders. Doing so allows cardholders to buy items using credit cards.

In essence, cardholders owe credit card issuers money. They then pay the amount back every time the credit card issuer bills them.

Credit Card Networks

Credit card networks are companies in charge of processing the transactions. They electronically move the money from the credit card issuer to the merchant and vice versa.

How Credit Card Refunds Works

Every time you buy an item using a credit card, the merchant doesn’t directly request you. Instead, it requests payment from the credit card issuer, which diligently pays the corresponding amount.

After paying the merchant, the credit card issuer records the amount and adds it to your account balance. The issuer then bills you every month, which you have to pay on or before the due date.

Basically, the process is the same when you return an item and request a refund. It’s just that the process works in reverse.

After you request a refund, the merchant processes this by paying the credit card issuer. In other words, the money will not go directly to you. Do not expect that the merchant will give you a cash refund.

The credit card issuer will begin processing your refund once the merchant has coordinated with them. Your refund request is completed once the credit is reflecting on your account. 

How Long Does a Credit Balance Refund Take?

credit balance refund debit

The turnaround time in processing your refund request depends on several factors. There is no standard time for this. Suffice it to say that you should not expect that processing will happen immediately.

Among the factors affecting the turnaround time are the following:

  1. Merchant’s Return Policy
  2. Shipping Method and Distance
  3. Credit Card’s Billing Cycle

1. Merchant’s Return Policy

The merchant’s return policy greatly impacts the turnaround time for a refund request. Some merchants can process your request in 3 to 5 working days. But some merchants take longer. You can check their website to confirm this.

2. Shipping Method and Distance

In most cases, items bought online take a longer time to process in terms of refund requests. This is because most of the items we buy online are from merchants located far from our place. Sometimes, the items even come from another country. In which case, returning the items will undoubtedly take a long time.

Requesting refunds for items bought online is also a challenge since there is no face-to-face communication. This is contrary to items you bought in a physical store. You can go back to the store and coordinate efficiently with the merchant. You can pinpoint who you were exactly transacting with when you bought the item if you have a sharp memory.

For items bought online, merchants sometimes have a policy wherein you first have to get authorization before sending back the item. Otherwise, they will not process your request right away. So, it’s best to first learn about the merchant’s policy. Don’t simply return the item because it may only result in further delays.

3. Credit Card’s Billing Cycle

Your billing cycle may also affect your refund request. Let’s say, for instance, your credit card’s cutoff is every 30th of the month. Then, you requested a refund on the 31st. The latest account statement that you will receive will not yet include your refund. Instead, it will reflect on your next account statement.

It is important to note that the account statement you will receive may have figures different from your current balance. This is because of your credit card’s cutoff date.

If you want to know your latest balance, you can instead use the credit card issuer’s website or mobile app—login to their portal for cardholders. You will then be able to view your updated transaction history.

Does a Credit Balance Refund Affect Your Credit?

The money that goes back to your credit card account is called an account credit. It is not considered a payment.

Do not assume that receiving an account credit eliminates your obligation to make a monthly payment. Some people wait for the completion of their refund requests before they resume paying their monthly bills. This is a wrong practice. They will only end up paying late fees. Worse, it can negatively affect their credit score.

So, don’t wait until your refund request gets settled. You don’t even know when it will be completely processed. Continue paying your credit card bill while you wait for your credit balance refund.

Besides, your credit card issuer will make the necessary adjustments once they receive the refund from the merchant. All you have to do is to wait for it to reflect on your account.

In case you’re wondering if there is such a thing as a credit balance refund debit, there’s none. Financial institutions do not use the term “credit balance refund debit.” But if there’s anything close to that, it could be the instance where the refunded amount is automatically added to your bill payment.

Impact of a Credit Balance Refund on Your Credit Score

chase credit balance refund

There are scenarios wherein your credit balance refund can have an impact on your credit score. Account credit can boost your credit score. This can happen if it decreases your credit utilization ratio.

The credit utilization ratio compares the total amount of the revolving credit you are using and your total available amount. Your credit utilization ratio is considered by credit scoring models when they calculate your credit score. When this ratio decreased to 30% or less, it can avoid hurting your score.

However, your credit score may be affected if your credit balance refund takes a long time to reflect on your account. This scenario can happen if your credit utilization ratio is pushed above 30% due to the purchase amount.

An example of this is if you have a credit card limit amounting to $10,000. Then, you bought an item worth $5,000, which you later returned. Even if you have already requested a refund, you can only use $5,000 of your credit limit. This will only adjust after the completion of the refund process.

How a Credit Balance Refund Affects Rewards Points

A credit balance refund will greatly affect your rewards points too. So, if you are expecting to claim a big reward, this might not happen so soon. Your refund request means that your existing points will adjust too. The points corresponding to the item you returned will disappear after the completion of your refund.

If you are really after your rewards points and don’t want them to disappear, talk directly to the merchant. Ask if you can instead get a cash refund. That way, you will not involve the credit card company anymore. This means that no adjustments will be made to your credit card account.

Chase Credit Balance Refund

A Chase credit balance refund is just like any other credit balance refund processed by all the other credit card companies or financial institutions. It is a reimbursement after paying more than your total credit balance.

You have the option to use the credit balance for future purchases. If not, you can request a refund from Chase.

Cardholders can receive their credit balance refund in the form of a check. They can also have it refunded in the form of an Automated Clearing House (ACH) refund credit. The amount will be credited to the bank account the payment was taken.

Legally, it is the obligation of the credit card issuer to provide a credit balance refund within 7 working days from the requested date.

Capital One Credit Balance Refund

The process practiced by Capital One for credit balance refund is generally similar to the processes of other financial institutions. They send the refunded amount to the cardholder. The cardholder also has an option to claim it in the form of an ACH refund credit.

Credit cardholders must remember that a credit balance refund is applicable only for payments that exceed the current balance.

To request a refund, you can contact the Customer Service team of Capital One. The hotline number is on the back of your credit card. You can also write a notice to Capital One to have the refund processed immediately.

As for the processing time of Capital One, it typically takes them 7 working days for refunds involving returned purchases. But different factors can affect the turnaround time. Sometimes, it takes several weeks to process the refund.

Conclusion – What Is a Credit Balance Refund on a Credit Card?

A credit balance refund refers to a type of reimbursement for paying more than your total credit card balance. One of the reasons why this happens is when you request a refund for a returned item. The amount refunded by the merchant can cause overpayment to your credit card balance. In which case, you have the option to have it refunded.

The process for refunding credit balance is generally similar for all credit card companies or financial institutions. You have different options as to how you want to receive your refund.

One option is to receive it by mail. The second option is in the form of an Automated Clearing House (ACH) refund credit. You can also use the refunded amount to pay your future balance.

Whichever option you choose, this can only happen if you process your refund request. There are several ways of doing so. One of which is by calling the financial institution’s Customer Service team. That way, you don’t only get to relay your request. You can also inquire more about their credit balance refund policy.

If you can’t reach them by phone, you can instead try to write to them. Tell them about your intention to get a refund.