Making purchases with a credit card can be easy and extremely convenient. Moreover, you often get various cashbacks, additional discounts, or reward points for using your credit card — be it booking a flight ticket online or buying a new phone in a store. But what happens when you have to cancel the purchase and initiate a refund for an item that you have just bought using your credit card? Or the money is deducted from your account but the transaction has failed? In both cases, you are eligible for a refund. But how will it be adjusted against your monthly credit card statement and how much will you have to pay?
The Reserve Bank of India (RBI) amended the “Master Direction – Credit Card and Debit Card – Issuance and Conduct Directions, 2022” on March 07, 2024. What has changed regarding credit card refunds and credit card bill payments? ET Wealth Online breaks it down for credit card users.
After buying something with a credit card, you may realise that you are not satisfied with the purchase and you want to cancel or return it. The merchant from whom you have made the purchase will have to refund you the money. How and when you receive a refund on a credit card typically depends on the return policy of the merchant. The usual norm is that the merchant generally credits the refund to your original mode of payment — when you pay from a credit card, the refund will be credited to that card.
When the merchant refunds the money, the amount is deducted from your existing credit card outstanding balance. It will be reflected as negative credit on your credit card statement. Meanwhile, the available credit limit will be increased by the same amount.
How long does it take to get a credit card refund?
A credit card refund is not immediate, it can take several days to process it since it has to go through the credit card networks and intermediaries. Keep in mind that the exact time limit of a refund on your credit card will depend on the merchant and your credit card issuer. The refund process generally ranges between five to 14 days to reflect on your credit card statement.
What are the RBI guidelines for credit card refunds for failed transactions?
The process of the credit card refunds is usually straightforward. But there are many doubts here regarding how a credit card refund will be adjusted against your credit card bill. If your credit card statement is generated and the refund is credited after that, do you need to pay the entire amount? If the refund is credited after you pay your credit bill, how will it be adjusted? To clear your doubts, RBI recently released Frequently Asked Questions (FAQs) on credit card payments for credit card customers.
Here is how the refund will be adjusted against your credit card
Scenario 1: Credit of refund/failed/reversed transaction within the same billing cycle
Assume, you purchased your credit card on October 15. After canceling the item, you got the refund on October 19, 2023, and your credit card bill was generated on October 21.
As the refund is credited well ahead of the bill generation date, the refund will be adjusted against other debits before calculating the total amount due on your credit card for that month.
Scenario 2: Refund of failed or cancelled transactions after the generation of the bill but before payment of the dues
For example, you made a purchase with your credit card on October 29 and then requested a cancellation. Your bill was generated on October 30. You had to pay your bill on November 18. The refund was credited to your account on November 4.
As the refund is credited after the generation of the credit card bill, the total amount due on your credit card will include the refund amount. However, the refund came before the credit card bill payment due date.
In such cases, the credit card customer can deduct the refund amount from the total outstanding bill and pay the rest while paying for the bill. “Therefore, the refund amount received on November 04, 2023, shall be adjusted towards the total amount due (TAD) and accordingly the cardholder will be required to pay only the remaining outstanding (remaining outstanding = TAD – refund amount),” the regulator said.
Scenario 3: Credit of refund/failed/reversed transaction for which payment has already been made
For instance, your credit card bill due date was on November 6. The refund was credited to your account on November 7. So, the refund came after you paid your credit card bill.
For such cases, RBI instructed, “As the cardholder has already cleared the dues, card-issuers shall seek the explicit consent of the cardholder to adjust the refund amount in line with the provision stipulated in Para 10(h) of the MD.” The consent should be obtained through e-mail or SMS within seven days of the credit transaction.
Case I: If the cardholder gives explicit consent, then the refund amount shall be adjusted.
Case II: If the cardholder does not provide consent or no response is received for adjustment of the refund, then the refund amount will be credited to the bank account of the cardholder in line with para 10(h), the central bank said.
“Further, if the cardholder makes a request for crediting the refund (a transaction for which payment has already been made), the same shall be credited back to the bank account of the cardholder irrespective of the cut-off defined under Para10(h),” the regulator added.
When a cardholder makes a request to the card issuer for reversal of the credit amount outstanding in the card account into his/her bank account, the card issuer is required to do it within three working days from the receipt of such request, RBI said.
So, when you get a credit card refund after you pay your credit card bill for the month, you will have options to either adjust it or get it in your bank account.
