What Happens to Money Returned to Credit Cards?


Using a credit card is a relatively safe and convenient way for individuals and businesses to make purchases over the phone, in person or online. Nevertheless, credit card transactions can have many of the same problems as other types of purchases, including merchandise that is not received or not as described. In these cases, cardholders can request a refund.


When you notify the credit card company to initiate a refund, the company will most likely initiate a dispute between you and the merchant. Once the dispute is open, you each have an opportunity to present evidence, such as a bill of sale, photograph of the merchandise, purchase agreement or records of your communication setting up the sale. You can only receive your money back if the dispute results in your credit card company agreeing with your reason for initiating the dispute.

Chargebacks and Credits

A chargeback is the name of the transaction credit card companies use to return your money. Likewise, merchants can request chargebacks if they agree to voluntary refunds, as with merchandise returns covered by return policies. The result of a chargeback is a credit to your account for the refundable purchase price. This shows up as a credit on your billing statement, usually as a negative number, to reduce your account balance. Your account may show a negative balance, which means that the credit card company owes you money, if the amount of the chargeback exceeds your balance.


The process for getting money back from a credit card transaction can take anywhere from a few days to a full month. Merchants must access their encrypted credit card data to request a chargeback unless you can present your credit card in person. While merchants and credit card companies can initiate chargebacks in a matter of hours, the credit card company's computer system may result in a delay before the refund shows up as a credit on your account.


When a credit card company or merchant returns money to a credit card account, the transaction falls under the Truth in Lending Act's Regulation Z. This federal law controls how credit card companies handle transactions, including chargebacks. The company must encrypt your account information for security and disclose information such as the timeframe for a refund. Other information available under Regulation Z, such as interest rates and fees, will apply to your new account balance once the chargeback is processed.

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