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 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.

What If You Use the Rewards Before Making a Refund?

If you use the rewards before making a refund, your card issuer will still deduct the rewards, potentially resulting in a negative balance. Future payments and purchases will balance out the rewards deficit until it reaches zero.

Regarding rewards points or miles accrued toward earning an intro bonus, the outcome depends on whether you’ve already received the bonus. If you’re still working to hit the qualifying threshold, the rewards will likely be subtracted from your points total. However, if you’ve already received the intro bonus, many card issuers won’t rescind it if a return drops your point total below the spending requirement. It’s always a good idea to contact your credit card company for clarification.

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.

Can You Ever Keep the Rewards?

You can keep the rewards you earn if the merchant issues you a gift card or store credit instead of a return of payment. In this case, you’re not receiving any money back, and the merchant still receives payment from the credit card company. Consequently, the rewards are still yours to keep.

Similarly, you effectively “keep” your points when 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 earn from a purchase before refunding it, you’ll get a deduction in your rewards balance. Rewards earned from new transactions will then “pay back” the negative balance until your balance reaches zero.

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

Use Your Credit Cards Responsibly for Maximum Benefit

Credit card rewards can offer cash back, travel discounts, and a variety 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, as lenders tend to offer their most favorable rates to those with higher credit scores.

At O1ne Mortgage, we are here to assist you with all your mortgage service needs. Call us at 213-732-3074 to speak with one of our experts today. We are committed to helping you make the best financial decisions and achieve your homeownership dreams.