Understanding Credit Card Rewards and Returns: What You Need to Know

At O1ne Mortgage, we prioritize consumer education on credit and finance. We aim to provide you with the best information to make informed decisions. If you have any mortgage service needs, feel free to call us at 213-732-3074. In this blog, we will explore what happens to your credit card rewards when you return a purchase and how to use your credit cards responsibly for maximum benefit.

What Happens to Credit Card Rewards When You Return a Purchase?

When you return a product purchased with a credit card, the process is straightforward: the money is refunded to your account. However, the situation becomes a bit more complex when it comes to the rewards you earned from that purchase. Generally, you lose the rewards when you get a refund. Here’s how it works:

Just as your card issuer adds rewards to your account when you make purchases, they also deduct them from your points balance when you get a refund. For example, if you return a $75 pair of jeans for which you earned 300 reward points, your statement will show a “-$75” in the amount column and “-300 points” in the rewards column.

Can You Ever Keep the Rewards?

There are scenarios where you can keep the rewards you earned. If the merchant issues you a gift card or store credit instead of a refund, you get to keep the rewards because you’re not receiving any money back. The merchant still receives payment from the credit card company, and the transaction amount remains on your credit card balance. Consequently, the rewards are still yours to keep.

Similarly, if you exchange items with a merchant, any point deduction from a refund is “re-earned” with the new transaction.

What Happens if You Already Used the Rewards?

If you use the points or miles you earned from a purchase before refunding it, your card issuer will still deduct the rewards, and your account could show a negative balance. In that case, rewards earned from new transactions will “pay back” the negative balance until it reaches zero.

Your credit card company is in a similar position if you get a refund after paying off your account balance in full. You’d have a negative balance, and future purchases or transactions would offset the amount until it returns to zero.

How Long Does It Take for the Card Issuer to Take Your Rewards Back?

Any rewards you’ve earned—whether cash back, points, or miles—are generally deducted from your rewards balance as soon as the return is posted to your account. Returns are usually processed within a few business days but can take longer, depending on the credit card company and merchant. You can see the adjustment in your account’s online dashboard right away, although it may not appear on your monthly statement until your next billing cycle.

Use Your Credit Cards Responsibly for Maximum Benefit

Credit card rewards can offer cash back, travel discounts, and a host of other perks. However, these rewards may not be worth it if you’re charging more than you can comfortably afford to repay in full each month. Paying interest on your credit card transactions can offset any benefit or value you receive.

Making regular, on-time credit card payments can also help you build credit since your payment history makes up 35% of your credit score. Additionally, aim to keep your balances as low as possible. Your credit utilization rate—the percentage of your available credit you’re using—accounts for 30% of your credit score.

Get a copy of your credit report and score for free with Experian to see where your credit stands. Address any issues you find by taking steps to improve your credit since lenders tend to offer their most favorable rates to those with higher credit scores.

Conclusion

Understanding how credit card rewards work, especially in the context of returns, can help you make more informed financial decisions. While it’s generally true that you lose rewards when you return a purchase, there are exceptions. By using your credit cards responsibly, you can maximize the benefits and perks they offer.

At O1ne Mortgage, we are committed to helping you navigate the complexities of credit and finance. If you have any mortgage service needs, don’t hesitate to call us at 213-732-3074. We are here to assist you in making the best financial decisions for your future.