Shreya purchased a dress from an online store and paid for it with her credit card. But when the package arrived, it was not as amazing as it looked in the picture. So she decided to return the item and get a refund.
A lot of us can relate to Shreya’s story.
Every day, online websites push multiple offers and deals on our phone screens. And those huge billboards outside the mall saying ‘SALE 50% OFF’ do not help either. Adding to this, the easy availability of money through credit cards leads to such impromptu shopping. But you cannot be spared of the buyer’s remorse later when you realize that you will have to return it.
Returns and Refunds are Pretty Simple
Whether you can return the items or not depends on the store or the website from where you have purchased. The refund processing time, however, is affected by the selling company’s policies and also on the credit card issuer. At most of the online stores, refunds take 7-10 business days to reflect in your account whereas some may process it within 3 days or even immediately.
Given below is the credit card to credit card refund processing time for some popular e-commerce websites. They initiate the refund as soon as they receive the returned item but the processing time is shared keeping in view the usual time taken by the card-issuing bank or NBFC.
|Online Shopping Website||Refund Processing Time Frame|
|Amazon||3-5 Business Days|
|Flipkart||7-9 Business Days|
|Myntra||7-10 Business Days|
|Nykaa||7-10 Business Days|
|Snapdeal||7-10 Business Days|
Why do Refunds Take Time?
As mentioned above, the refund is initiated by the merchant as soon as they receive the returned item. The hold-up will be on part of the banking organizations. This is what takes place behind the scenes.
- The merchant makes a return request through the payment gateway
- The gateway shares this information with the acquiring bank (the bank in which the merchant has an account)
- The acquiring bank communicates this to the issuing bank (the credit card-issuing bank/NBFC)
- The issuing bank then accepts this request and processes the refund
- After this, the amount is refunded into the customer’s account
Because information travels through multiple channels in case of a refund and each of these parties have their own processing mechanisms, it takes 5-10 business days for the amount to be credited into the customer’s credit card account.
Also Read: How Credit Card Transaction Processing Works
Refunds may be Tricky in Case of Credit Card EMIs
When you purchase an item using a credit card and create EMI for it directly from the website, the refund procedure may be a bit complicated. Usually, it takes about a day for the bank/NBFC to convert the transaction into an EMI. Considering this, there may be two scenarios:
- When you cancel the order before EMI is created by the card issuer
- When you send the return/cancellation request after EMI is created on the card
In the first scenario, we have taken into account an immediate cancellation of the transaction under which the amount is immediately refunded back into the credit card account.
Whereas, in the second scenario, EMI and the amortization schedule have already been created and shared with you on email/SMS. In this case, you will have to pay an extra charge for cancellation (foreclosure) of the EMI which is charged as a percentage of the total amount.
You may also choose to keep the EMI active which is to be paid every month. Since the transaction amount will be refunded by the merchant into your credit card, the debit and credit will nullify it. However, you will still be paying a little extra in the form of interest on EMI and GST. No Cost EMI transactions do not attract charges in case of foreclosure/cancellation.
Refunds in Case of Transactions in Foreign Currency
When it comes to transactions in foreign currencies, the refund procedure is mostly the same. The processing may take longer. However, you will be stuck with the foreign transaction fee (1.99% – 3.5% of the transaction amount) as it is charged by the card issuer. In some cases, the issuing bank/NBFC may return the fee especially when the refund is initiated immediately and the currency values do not change in the meantime.
What happens to the Reward Points in case of Refunds?
When you purchase an item using your credit card, the issuer offers you benefits in the form of reward points, air miles or cashback. Almost all banks forfeit the reward points if you initiate a refund for the said transaction. Just as the bank refunds the amount back into your credit card account, you will also have to return the benefits you have earned for the transaction.
How is a Refund Reflected in the Credit Card Statement?
Refunds are shown as credits in your credit card statement. An important point to note here is that if you initiate the return after your billing period ends and you have incurred certain charges and taxes on the transaction, the refund would not offset these charges.
Also, if your bill is generated before the refund is processed, the transaction amount will show as a debit and will be included in your outstanding amount. If the refund is credited before the due date of payment, you can deduct the refund amount from the total amount due and pay the remaining outstanding amount. Let us understand this through an example.
Suppose you purchased an item worth Rs. 5,000, returned it and a refund has been initiated on the 5th of September. Your statement date is 7th September and the refund does not reflect in your account and, in the meantime, your bill is generated. The total amount due is Rs. 20,000. The due date for payment is the 25th of September and the refund initiated previously is credited on the 10th of September. In this case, you can pay only Rs. 15,000 (after deducting the refunded amount).
Refunds, especially those of huge amounts, take a lot of patience on your part. You can stay on top of the updates by checking your account regularly. You can also call the credit card issuer to get regular updates.
What to do in case of delayed refunds?
The most common question asked by our reader is what to do in case of a delayed refund if the statement has already been generated (including the previous purchase amount). There can be two scenarios under this:
Refund received after statement generation but before bill due date
Let’s consider a purchase of Rs. 5,000 made on 1st Sept and you placed a refund request on 3rd Sept. Though the refund has been initiated, it has not been credited into your account until 10th Sept. However, your credit card statement is already generated for the period on 6th Sept and it includes a debit of Rs. 5,000 (for which you already initiated the refund request).
Now, you have already received the refund amount on 10th Sept and considering your bill due date to be 25th Sept. In this case, most of the card issuers would advise you to deduct the refund amount from your total outstanding and pay the rest. For example, if the bill was Rs. 20,000, you should only pay Rs. 15,000.
We suggest you must contact your credit card provider for a better understanding of the situation as the terms and conditions may vary from one card issuer to another.
Refund delayed but bill paid in full
In the above example, let us assume you paid the bill of Rs. 20,000 in full. In this case, the refund of Rs. 5,000 received will be shown as a credit in the next statement (as in the previous example) but it will be an extra credit as you already paid for this in your previous bill. This Rs. 5,000 will be added on to your available credit limit. This amount may be adjusted against your future purchases.
For example, you made a total purchase of Rs. 15,000 in the next billing cycle but your bill will be generated for only Rs. 10,000 as you had Rs. 5,000 extra in your credit card account.
Some card issuers may agree to refund the excess credit back to your bank account. However, this is subject to multiple terms and conditions. You must contact the customer support cell of your card issuer to get more clarity on credit balance refund.
Even if the refund is not possible, it will be added on to your available credit limit and your future purchases can be adjusted against it.