Credit cards and refunds

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Forums › Finance and wealth management › Credit cards and refunds

heavenlywild

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#144177 9-May-2014 18:01

Quick question.

Let's say you are billed for $500 on your credit card.

In the next month, you get a $100 refund for a purchase you had made in the previous statement (which made up the $500). Is the refund therefore like a payment you've made towards the $500 bill and so you should only pay $400?

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#1040986 9-May-2014 18:06

Check your credit card terms and conditions but I suspect refund is not a actual payment

Geektastic

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#1040999 9-May-2014 18:26

Whichever option works best from your point of view....is almost certainly not the answer...!!

billgates

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#1041004 9-May-2014 18:32

Yes, it's a form of payment as $100 has been credited towards your account.

Do whatever you want to do man.

nigelj

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#1041009 9-May-2014 18:41

heavenlywild: Quick question.

Let's say you are billed for $500 on your credit card.

In the next month, you get a $100 refund for a purchase you had made in the previous statement (which made up the $500). Is the refund therefore like a payment you've made towards the $500 bill and so you should only pay $400?

I went through this with Westpac (although on a much larger scale), a refund doesn't count as a payment for that month, it makes zero sense in my opinion, thankfully I was able to compromise somewhat with them which let me move the refund (in excess of a grand) back into an interest bearing account without the risk of cash advance fees/cash advance interest (in the event of a slight miscalculation).

Unfortunately the wording on the credit card statements (at least Westpac's) is extremely poor and implies potentially otherwise, I don't think they've changed this yet.

timmmay

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#1041020 9-May-2014 19:02

IMHO It reverses part of the transaction, it's not a payment.

richms

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#1041030 9-May-2014 19:07

Its certainly not a payment. Dont know why you would expect otherwise?

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Inphinity

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#1041074 9-May-2014 19:49

No, it's not a payment, but given most credit card providers calculate the minimum payment as a percentage of the balance, the refund would reduce the balance owing and thus reduce your required payment.

PenultimateHop

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#1041076 9-May-2014 19:58

I think it will depend on the card issuer's policy, but my experience has been that refunds do apply to reducing the current outstanding balance. In fact on a number of cards, Refunds/Credits/Payments are shown in the same area.

To give a recent example from my March American Express bill:
Previous balance: $4314.15
Payments/credits: $4355.48 (+$41.33 in random refunds)
New Charges: $6793.29
New balance to pay: $6751.96 (new charges - $41.33)

gzt

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#1041084 9-May-2014 20:04

timmmay: IMHO It reverses part of the transaction, it's not a payment.

+1. Else you could keep an account going forever meeting t&c's just on the 'credits' from refunds. Basic accounting fail.

But.. there may be more complex scenarios where credit of interest already paid etc could apply. But then that is money you have paid them so kind of obvious I guess.

heavenlywild

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#1041103 9-May-2014 20:33

It's interesting that even asking the bank, they aren't too sure.

Here's another one. What if your credit limit was $5000 but because you wanted to buy something that would require $6000 say, you put in $1000 towards your credit card. Does that then allow you spend $6000? Hehehe sorry just playing devils advocate here.

PenultimateHop

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#1041105 9-May-2014 20:38

heavenlywild: It's interesting that even asking the bank, they aren't too sure.

Here's another one. What if your credit limit was $5000 but because you wanted to buy something that would require $6000 say, you put in $1000 towards your credit card. Does that then allow you spend $6000? Hehehe sorry just playing devils advocate here.

Yes, that works just fine (although subject to issuer caveats I am sure). I used to have to do that before banks in NZ stopped being ridiculously conservative with credit limits.

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Inphinity

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#1041107 9-May-2014 20:40

heavenlywild: It's interesting that even asking the bank, they aren't too sure.

Here's another one. What if your credit limit was $5000 but because you wanted to buy something that would require $6000 say, you put in $1000 towards your credit card. Does that then allow you spend $6000? Hehehe sorry just playing devils advocate here.

Yes, a credit card can be put into credit, so absolutely you can do this.

scuwp

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#1041114 9-May-2014 20:47

heavenlywild: It's interesting that even asking the bank, they aren't too sure.

Here's another one. What if your credit limit was $5000 but because you wanted to buy something that would require $6000 say, you put in $1000 towards your credit card. Does that then allow you spend $6000? Hehehe sorry just playing devils advocate here.

Yes. Think of your credit card as just another bank account, with a built in overdraft.

Lazy is such an ugly word, I prefer to call it selective participation

PenultimateHop

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#1041115 9-May-2014 20:47

Inphinity:
heavenlywild: It's interesting that even asking the bank, they aren't too sure.

Here's another one. What if your credit limit was $5000 but because you wanted to buy something that would require $6000 say, you put in $1000 towards your credit card. Does that then allow you spend $6000? Hehehe sorry just playing devils advocate here.

Yes, a credit card can be put into credit, so absolutely you can do this.

In fact years ago this used to be the most cost effective way to withdraw cash overseas: for many banks, a card in credit wasn't assessed any cash advance fees (including ATM withdrawal fees).

ISTR most banks stopped this around 2005. Pity.

rugrat

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#1041297 10-May-2014 12:06

Most answers say not a payment.

So if you brought $500 on card from one store, then returned it and got $500 credited back to card so balance is now $0 on card, then the credit card company would still expect payment of $500 even though there is currently nothing owing on card?

Seems a strange one.

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