If you return a product or service purchased on a credit card, you will usually lose the points earned on the purchase. You may get the money back as a refund. But the number of points earned is deductible from the rewards balance. This is irrespective of the purchase at an offline or online store. If you purchase your credit card, then the deduction will reflect in your next credit card statement.
So, when returning a purchase, remember – you cannot keep the refund as well as the rewards earned on a returned product. Otherwise, people will keep purchasing items and returning them, enjoying the rewards. This is unfair for the trade. In this post, we will take you through what you are in for regarding earned rewards and bonuses, after receiving a refund on credit card purchases.
How Do Purchase Refunds and Reward Points Deduction Work?
Let us consider this instance:
Imagine you are a retailer, and a customer purchases a handbag for Rs. 3,000. As a reward, you offer them 50 reward points, which they can use for the next purchase. But as per the return policy for defective products, you are prepared to offer a complete refund to the customer. The customer returns the handbag because of a major default in the design.
- As per the terms and conditions, you have to provide Rs. 3,000 (purchase value of the handbag) to the customer.
- But what will you do about the 50 rewards points? Since the purchase is nullified by returning the product value to the customer; you will certainly take back the 50 reward points.
If you still keep the 50 rewards points with the customer, then your business is making a loss of those many reward points. As goodwill, suppose you do not take back the points from the customer. But what if there are multiple returns to deal with. Can your business keep on bearing such losses? Definitely, this is something to think about.
How Credit Card Rewards Point Deductions Apply on Purchase Refunds?
Now, let us apply the same thought on credit card refunds and reward point returns:
You purchase a mobile phone for Rs. 12,000 on your credit card. And on this purchase, you earn 100 cashback rewards points. But due to some reason, you have to return the product. And as a refund, you get a credit of Rs. 12,000 to your account. On your next credit card statement, you will see two things. Firstly, return of Rs. 12,000 as a credit. Secondly, 100 points were deducted from the running reward balance.
What If You Already Use Up the Credit Card Rewards?
Considering the immediate above-mentioned example, as a part of the reward program, you receive the promised 100 reward points. Very soon, you use up the 100 points. But later on, you return the mobile phone for a refund and even receive Rs. 12,000 in your account. Then what happens to the used up reward points? The same will be deducted against your current earnings.
So, the card provider is not removing the points from the rewards program. But it is deducting those from your current earnings, just like the credit of Rs. 12,000 on your current spending for a refund.
Can Credit Card Return Protection Save the Deducted Rewards?
The answer is – no. The return protection plan means that you can return the product. This is true even if the retailer is unwilling to take the item back. But the credit card company will issue a refund of Rs. 12,000 if the same falls in the parameters of the return protection guarantee. When the refund reflects on the credit card statements, the 100 points earned from the purchase will show as deducted from the current balance on the statement.
How Credit Card Returns Affect Bonuses?
If you go for a return on a credit card purchase, then any associated future spending bonus will be withdrawn as well. For instance, you have to spend Rs. 2,000 on your credit card in a particular period to receive the signup bonus. You meet this milestone spending criterion. But a return you had requested for, applied a deduction of rewards. An equivalent amount from the earnings will be subtracted from the current earnings.
This will leave you short on the earnings required to receive the signup bonus. So, not only you will lose the reward points, but the opportunity to earn the signup bonus as well. Thus, if you buy an item online from a rewards portal, you may lose the bonus points. Usually, it takes a few days or weeks for the awarded bonus points to reflect in your account.
On returning a product, the bonus points are then taken away before the same are accrued to the account. The purchase will also not be counted in cumulative earnings if you spend for a bigger rewards bonus. Thus, whenever requesting a return on a credit card, do understand the implications it may have on earnings, rewards, and bonuses.
Can You Keep the Reward Points by Requesting for a Store Credit?
Most of the retailers will necessitate the use of the same credit card you had used for the initial purchase or other forms of payment to return the amount. But it is difficult to expect that you will not lose the reward points on making a return. But there is a way to get the refund not on your account, but as a form of store credit.
If the retailer is ready to give you a store credit like a gift card against the actual amount of refund, then you can keep all the credit card reward points earned. Since the refund does not come to the account; there is no deduction of rewards from the current earnings. However, such a benefit comes hard, and not a trend. Also, you will still have to pay the interest or charges on the purchase amount.
Can You Keep the Reward Points on Exchanging the Item for Another?
You may be able to retain the credit card rewards earned if you request for return and exchange. But the catch is the product value has to be the same as the initial purchase. For instance, the mobile phone you get in exchange for the earlier returned one has to be Rs. 12,000 as well. If the purchase amount is any lower, then a relevant number of rewards points is deducted from the current earnings.
However, if the purchase value is greater than Rs. 12,000, say Rs. 15,000, then you may earn additional reward points on the already accrued 100 reward points, on the price difference of Rs. 3,000. But this is not universal for every credit card company policy. Know the policy or return and exchange as well as the rewards program to know what you can expect.
It is common to request a credit card refund on purchases that did not meet your expectations. But it may have certain effects on the earned reward and bonus points. It is important to understand the policies for the same by the credit card company. This will help you to keep a track of the earnings on a credit card, and how to manage the spending.