Why do credit cards take so long to refund?

Written by dennis hartman
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Why do credit cards take so long to refund?
Credit card refunds use the same networks as charges. (Jupiterimages/Polka Dot/Getty Images)

Customers have many reasons to use credit cards for purchases of all sizes, from the convenience and security of not carrying cash to rewards points and liability protection. Credit cards also make refunds easy, but account credits take time to process. This can leave cardholders wondering if they will ever get their refunds.

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Refund Process

One of the key reasons that a credit card refund takes as long as it does is the number of steps involved in the refund process. When you initiate a refund, as when you return merchandise to a store, the seller requests a refund by beginning a new transaction request on the credit card network. The card company must receive this information, check it against your purchase history, confirm the merchant's request, clear the refund with its bank and transfer the credit to your account. The credit card's billing department must then issue a statement that shows the refund as a credit, which serves as the final step in the process. Each step is an opportunity for delays due to human or computer error, or due to waiting for a billing cycle to elapse.

Timeline

According to the TaxAct website, credit card refunds can take anywhere from two to 30 days before they are complete. The first 24 to 48 hours of this period involve the initial refund with the credit card company. But credit card companies use major banks to supply the funds they lend to cardholders to make purchases, which means that the credit card's policies as well as the bank's policies can delay the refund.

Billing Cycle

Customer billing cycles also control how long it takes to receive news of a credit card refund. For example, if you have an account that ends on the 29th day of each month, you may receive your card statement on the 5th day of the next month. If you return merchandise on the 30th, it will be the first transaction on your statement for the next billing cycle. In other words, five days after making the return you'll receive a statement that will not list the refund, though it will list the initial purchase. Your refund will appear on your next statement, which you'll receive 35 days after the date of the return. If you have online account access, you'll be able to see the refund as soon as it's processed instead of waiting for the next statement to arrive.

Reasons for Refunds

The reason for your refund request also affects the time it takes to process. While in-store merchandise returns are relatively straightforward, other transactions are not. For example, if you purchase merchandise online and need to return it, the merchant may wait to receive the return before initiating a refund. Refunds through college or university bursars' offices are also subject to increased processing times as someone with database access must view your account to request the refund. Refunds that you request due to fraud may require investigations that delay your refund indefinitely.

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