What Happens to Credit Card Rewards When You Return a Purchase?

Returns on credit card purchases typically work the same as they do with other forms of payment. You return the product, and the money is refunded to your account. Simple enough. But what happens to the credit rewards you’ve earned when you return a purchase? Unfortunately, you generally lose rewards when you get a refund for a purchase. Here’s how it works.

Can You Ever Keep the Rewards?

You can keep the rewards you earn if the merchant issues you a gift card or store credit in lieu of a return of payment. After all, you’re not receiving any money back. The merchant still receives payment from the credit card company, and the transaction amount remains on your credit card balance. Consequently, the rewards are still yours to keep.

Similarly, you effectively “keep” your points when you exchange items with a merchant. Any point deduction from a refund is “re-earned” with the new transaction.

What Happens if You Already Used the Rewards?

You’ll get a deduction in your rewards balance if you use the points or miles you earn from a purchase before refunding it. Rewards earned from new transactions will then “pay back” the negative balance until your balance reaches zero.

Your credit card company is in a similar position if you get a refund after paying off your account balance in full. In that case, you’d have a negative balance, and future purchases or transactions would offset the amount until it returns to zero.

Use Your Credit Cards Responsibly for Maximum Benefit

Credit card rewards can give you cash back, travel discounts, and a whole host of other perks. These rewards can be beneficial, but they may not be worth it if you’re charging more than you can comfortably afford to repay in full each month. Remember, paying interest on your credit card transactions can offset any benefit or value you receive.

Making regular, on-time credit card payments can also help you build credit since your payment history makes up 35% of your credit score. Also, aim to keep your balances as low as possible. Your credit utilization rate—the percentage of your available credit you’re using—accounts for 30% of your credit score.

Get a copy of your credit report and score for free with Experian to see where your credit stands. Address any issues you find by taking steps to improve your credit since lenders tend to offer their most favorable rates to those with higher credit scores.

Contact O1ne Mortgage for Your Mortgage Needs

At O1ne Mortgage, we understand the importance of managing your finances wisely. Whether you’re looking to buy a new home or refinance your current mortgage, our team of experts is here to help you every step of the way. Call us today at 213-732-3074 for any mortgage service needs. Let us help you achieve your financial goals with the best mortgage solutions tailored to your needs.