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Can You Reverse A Credit Card Transaction?

By February 23, 2021 No Comments

As the world is evolving, so are the payment methods. Payment options like digital payments, wallet payments and, credit and debit cards are available and, are more stressed upon so that users have the ease of purchasing without having to carry cash. Moreover, people are more inclined towards buying through online methods rather than going to the shops personally which emphasized more the need for other payment options.

Talking about debit and credit cards, both are a convenient option. A debit card lets you take out money from your own bank account while a credit card lets you take out money that you borrow from the bank and has to be repaid. However, there are various advantages associated with credit cards such as building good credit and having better security options.

A debit card can be comprehended as a plastic cheque in other words. When you use it to buy goods, it draws money from your bank account. This means you can only spend less than or equal to the amount you have in your bank account, not more than that.

Whereas, a credit card acts like a loan that you have to repay at the end of the month. There is a limit for a credit card known as a credit limit. This indicates how much you can spend using a credit card. Some known issuers of credit cards are Discover and American Express.

Can You Reverse A Credit Card Transaction?

Yes, you can reverse a credit card transaction. But you must keep in mind that this reversal might take some time. If you have purchased a good and want to ask for a refund, it may not be immediate. Credit card refunds are a form of authorization. It takes some time and is in a pending state. While this refund is in the pending process, your issuer of credit card holds the funds that you have gotten as a refund so that you don’t purchase something else of the same amount. You might not see the amount refunded on your account statement for a couple of days though.

In case your refund is not processed till your billing cycle is complete, you will have to pay your credit card bill and it will be settled later. In a case scenario where you have returned an item and got rewards points instead, your rewards balance would be impacted. A credit card acts like a loan that you have to repay at the end of the month. There is a limit for a credit card known as a credit limit. This indicates how much you can spend using a credit card. Some known issuers of credit cards are Discover and American Express.

In a case scenario, where your transaction was either not authorized by you or the items that you paid for were not delivered, you can dispute a transaction. In both cases, you can ask for a refund.

Usually when you return a product, here is what happens with your card account. The business or shopkeeper would issue a refund to the account of your credit card. Once you have asked for a refund, it would take about a week to show the credit that is refunded in the transactions through your credit card. The points that you have earned or the cash that you have gotten back on your returned purchase would be reversed.

The same process occurs when you request a reverse. However, in the case that you have not made any transaction and it is someone else who has done it, you must call your card issuer and seek help. The good news is that you can reverse the transaction from your card statement but the sad news is that it does not show immediately on your statement. A refund for an item that is returned or reverses in the transaction would take about a few business days, in general, to show up on the statement. In most cases, it could take even a week or more before the purchase that is refunded appears on the ledger of your credit card and to make changes on your card balance.

The good part is that you are not held responsible for making a payment on the fund that is charged when the refund is being processed during the billing cycle of the credit card. However, if you have returned an item after or very close to the billing cycle’s end then the transaction’s refund would not show earlier than your next payment is due for the credit card. It does not matter what is the timing of your return or purchase, if you fail to pay the bill of your credit card, you are very likely to be penalized by the company of your credit card for a late fee. This means even if you are expecting a refund, you cannot avoid making a minimum payment to the card issuer.

In case of a reverse transaction that is credited to your credit card account, any bonuses, cash backs, or rewards that you may have gotten on originally purchasing the item, will be lost.

The issuers of credit cards have some policies which state that they would lessen the reward points or cashback credit that you have earned previously from your account when you get a refund. It is fair enough because if there would not be such a policy then customers would take advantage by getting refunds and gathering a lot of reward points on big purchases.

In general, the same policy applies to signup bonuses. Such bonuses are generally found on travel and rewards credit cards. This means that if you have gotten a signup bonus when you purchased something and later returned it, you will lose that bonus. You must go through the card agreement to find out how the rewards and bonuses would be settled in case of refunds.

However, you must be aware of the fact that you can also get a negative reward balance. If you have purchased an item and have gotten some rewards on the original purchase and have also redeemed those rewards. In this case, if you return the item then you will end up getting a negative reward balance. This means that you will have to earn some rewards by purchasing items and then get back to zero so that you can end up getting a positive reward balance.

What is a Negative Balance?

There are some situations where you can get a reverse transaction on your credit card even after you have paid your bill. This means that if you are not indebted to the issuer of your card when your refund is being processed you may get a credit in your account. This might be the case also when the amount you are getting refunded is more than the outstanding account balance. Such a credit category is known as an overpayment, negative balance, or a credit balance. Although the name itself does not give a positive outlook a negative balance is not considered to be a bad thing for a credit card. A negative balance means that the company of your credit card owes you instead of you being indebted to them.

You will be surprised to know that having a negative balance on your card acts the same way as having a gift card. When you purchase anything in the future, it would be subtracted from the credit present on your account. In such a case when you have spent all the credit amount, you will be billed for your future purchases normally.

In a case scenario where you have not been using your credit card for a couple of months, the credit card issuer might give you a cheque for the credit that is outstanding on your account. However, the policies for overpayment may vary among the companies of credit cards.

As a credit card user, if you have any queries regarding what are the policies for negative balances applied to your credit card, you can go through your agreement of credit card and call the number of customer service mentioned on the back of your credit card a call. If you are worried about how a negative balance would affect your credit scores then don’t worry, a negative balance would not harm your credit scores. Sadly, it would not benefit your credit scores as well. It does not matter how much the issuer of your credit card owes you, you will still have zero balance on the reports of your credit due to the negative balance. So do not worry about how it would affect it.

How to raise a Dispute?

When you receive your credit card statement and see that there is a transaction made that is not made by you, you must raise a dispute. You need to raise a dispute with the card issuer and let them contact the bank that processed the transaction. Once they have contacted the acquiring bank, the business with whom the transaction has been made will be contacted and approached for a chargeback.

If the business is at fault then they will be charged back for it without getting the purchased items back. The business can be at fault as they would not have checked the individual’s identity and would have swiped the credit card which happens in many cases. If the transaction would have been made online where the business does not ship the items until and unless they receive the payment then it would be easier for the business to chargeback.

How to request for a reverse if you no longer want the item purchased?

According to Federal law, your credit card company should send you your requested refund within 7 working days of your request, especially when you have a credit balance on your account. But you must request that refund and it should be in writing.

Although, Federal law does not allow customer service representatives of card issuer companies to attend to refund requests on the phone some card companies do so for the convenience of their users. If your credit card issuer does so, then you can call on their customer service number and find out if your card issuer policy allows so. There are chances that your card issuer might ask you to mail them the refund request. You can send a refund request through certified mail and attach the receipt of the return.

Apart from this, Federal law states that if cardholders have any leftover credit balance on their account, card issuers must send it to them after six months. In such a case that the issuer of your credit card is unable to reach you, they should try tracing you through other means such as your telephone number or your last known address, etc.

If your transaction was made in a foreign currency then there would be a difference in the process of refund or reverse. This is because some card issuers charge a fee for foreign transactions and some do not. If your card issuer charges a fee for foreign transactions then there is a chance that you may not get that fee when you ask for a reverse. However, if you want the foreign transaction fee back, then you must call your card issuer and request a reverse for it. Apart from this, there are chances of fluctuations in the rate of the foreign currency if a lot of time has passed since you had originally made the purchase or the transaction had been made. Companies of credit cards make use of the existing market rate of the currency that you have used to purchase an item in situations of refund. They would see what is the current market rate of the foreign currency and then analyze how much should be refunded. This can be either good news or bad news for you. If the current market value has increased then you might make money whereas if the currency rate has declined then you might lose money which wouldn’t be so fulfilling for you.

Another aspect to consider while purchasing an item in foreign currency is that just like the markets of regular commodities, the trading market of currency also acts the same. This means when you purchase a currency unit, you will have to pay more and when you go to sell it, it would sell for a slightly lesser price. So, if you have made a purchase in a foreign currency, and you plan to return it, do it as quickly as you can as the more time you take to return it, the more chances will increase of losing your money.

Which situations apply for credit card reversals?

You are qualified for asking for a credit card transaction reverse:

  1. If the transaction was not made by you or a card holder of the credit card then you can ask for a reversal.
  2. If you find some purchases on your credit card statement that are not present on the receipt.
  3. If there are some pending refunds that have not been processed.
  4. If you have received defective or wrong items.
  5. If the transaction made was fraudulent.
  6. If your transaction was mistakenly added more than once to your account.
  7. If there are cancelled auto payments added and charged to your account.
  8. If you have been charged for services that you have not received.
  9. In case of an error that has occurred during the withdrawal of the money.
  10. In case that you have made an advance reservation but have cancelled before the allowed cancellation period ends.

What happens when you ask for a reverse?

When a customer uses their credit card to purchase an item, the business or shopkeeper begins the procedure of getting paid by the issuer of the credit card and not by the customer who is purchasing the item. As the transaction is processed and gets approval, the credit amount available in the customer’s account is lessened and is eventually billed later by the card issuer company.

Now if the customer can pay the credit bill or not is not the problem of the business or retailer from whom the customer has purchased an item. This is because the business has already received the money in return for the purchase made. However, when the customer asks for a return for the purchased item, the business issues a refund to the account of the credit card instead of giving the amount directly to the customer. This is because the business is paid by the issuer of the credit card and not by the customer itself. Therefore, the customer does not get to receive the cash on a refund for a purchase made by the credit card.

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