• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

What happens if you are issued a refund to a credit card that puts you "above" your original credit limit?

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

Jgutta420

Active Member
What is the name of your state? Florida


So to keep it simple, say your credit limit is $500. You charge $100 at Walmart so now you have $400 of available credit. Say in 3 days when you get paid, you pay the credit card down by $50 so now you have $450 of available credit. Then you decide for whatever reason to return the item. When the refund is credited to your credit card it would put your balance at $550...$50 above your original credit limit. Would they just apply the $50 and put your limit back to $500 and send you a refund check for the other $50 or would your new limit be $550?
 
Last edited:


LdiJ

Senior Member
What is the name of your state? Florida


So to keep it simple, say your credit limit is $500. You charge $100 at Walmart so now you have $400 of available credit. Say in 3 days when you get paid, you pay the credit card down by $50 so now you have $450 of available credit. Then you decide for whatever reason to return the item. When the refund is credited to your credit card it would put your balance at $500...$50 above your original credit limit. Would they just apply the $50 and put your limit back to $500 and send you a refund check for the other $50 or would your new limit be $550?
Your credit limit would stay the same, you just would have a credit towards your next payment. In other words, the next time that you charged something and got a bill, the bill would have a negative balance due, or a smaller balance due than normal.
 

Jgutta420

Active Member
Your credit limit would stay the same, you just would have a credit towards your next payment. In other words, the next time that you charged something and got a bill, the bill would have a negative balance due, or a smaller balance due than normal.
Makes sense, thanks!
 

Zigner

Senior Member, Non-Attorney
If you leave that extra money there too long without making any additional purchases, the card issuer may refund the excess to you.
 

Zigner

Senior Member, Non-Attorney
Your credit limit would stay the same, you just would have a credit towards your next payment. In other words, the next time that you charged something and got a bill, the bill would have a negative balance due, or a smaller balance due than normal.
No, you don't get a credit towards a future payment. A refund does NOT count as a payment, it simply lowers the balance due on the card. A side effect may be to lower the amount due, but if only the minimum payment is due before the credit, the minimum payment will still be due after the credt.
 

LdiJ

Senior Member
No, you don't get a credit towards a future payment. A refund does NOT count as a payment, it simply lowers the balance due on the card. A side effect may be to lower the amount due, but if only the minimum payment is due before the credit, the minimum payment will still be due after the credt.
It does if there is no balance due on the card, or the balance due is less than the refund, which is the case in this scenario.
 

Zigner

Senior Member, Non-Attorney
It does if there is no balance due on the card, or the balance due is less than the refund, which is the case in this scenario.
I know it seems like we're arguing semantics here, but a refund does not count as a payment in ANY scenario. It only counts as a credit, which reduces the total balance due on the card.
 

LdiJ

Senior Member
I know it seems like we're arguing semantics here, but a refund does not count as a payment in ANY scenario. It only counts as a credit, which reduces the total balance due on the card.
Ok, then you explain to the OP how its going to work when a 100 refund gets applied to a zero or 50 dollar balance card? Please explain the mechanics to him.
 

Zigner

Senior Member, Non-Attorney
Ok, then you explain to the OP how its going to work when a 100 refund gets applied to a zero or 50 dollar balance card? Please explain the mechanics to him.
It's applied as a CREDIT, not a PAYMENT. If the credit brings the card to a zero or negative balance then you're right, no payment would be due, but only because a refund was applied as a credit (not a payment). It may seem to be semantics, but it's VERY important that one realizes that they are different. This month, the OP may have ended up with a negative balance and no payment due, but what happens in 3 months when the situation is a bit different and the OP has a balance of $250 with a payment due of $25, then gets a refund for $50 and thinks "Hey, I got that refund for $50, that'll cover my payment."? It doesn't. A refund is a CREDIT, not a PAYMENT. It's an extremely important distinction.
 

LdiJ

Senior Member
How about we just make it a little simpler:

OP, in your scenario your card would end up with a negative balance. You would not have to make any payments until the negative balance is used up.
 

Zigner

Senior Member, Non-Attorney
Would they just apply the $50 and put your limit back to $500 and send you a refund check for the other $50 or would your new limit be $550?
Just one other point to clear up. Your new limit would not be $550 in this scenario. Your limit is still $500, but you would have a negative $50 balance. Yes, you could charge $550 on the card at that point, using up the $50 credit and the $500 limit, but that's a very bad move because any fees, credit reversals, or interest due can cause you to go over the limit.
 

Chyvan

Member
It's applied as a CREDIT, not a PAYMENT. If the credit brings the card to a zero or negative balance then you're right, no payment would be due, but only because a refund was applied as a credit (not a payment). It may seem to be semantics, but it's VERY important that one realizes that they are different. This month, the OP may have ended up with a negative balance and no payment due, but what happens in 3 months when the situation is a bit different and the OP has a balance of $250 with a payment due of $25, then gets a refund for $50 and thinks "Hey, I got that refund for $50, that'll cover my payment."? It doesn't. A refund is a CREDIT, not a PAYMENT. It's an extremely important distinction.
This is not universal, and it's very much a bank thing. I have a card that treats returns as payments.
 
Sponsored Ad

Top