Merchant refund can create credit balance

Yes, you can spend it, but wait until it's in hand


Credit Wise
Credit Wise columnist Kevin Weeks
With more than 20 years experience in the nonprofit credit counseling industry, Kevin Weeks joined the Financial Counseling Association of America (, @TrustFCAA) as its president Dec. 1, 2014. Weeks has extensive knowledge of both the credit counseling industry and the FCAA organization, having served in leadership positions for three of its member agencies and on the FCAA board of directors. In addition, Weeks is working with FCAA members to help develop a long-term solution to the student loan crisis through the website Weeks holds a bachelor of science degree in business administration, management information systems from Salem State University.

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Question for the expert Dear Credit Wise,
Hey Kevin, quick question: I have an American Express that I pay in full each month. I just paid my bill but I am waiting on a refund from a merchant. When refunded will I have a negative balance on my credit card that when spent it will just pull from there? I kinda like having a balance on PayPal and using that balance to buy something. I hope you can follow what I am trying to ask. Thank you for your time! -- Rustin

Answer for the expert Dear Rustin,
I want to congratulate you on your practice of paying off your credit card bill every month. My readers know that this is something I regularly recommend as best practice for protecting your credit, so kudos to you for that.

If I understand you correctly, you paid your bill in its entirety, including the refund amount you are expecting. So yes, once your refund is processed you will have a credit on your account for the amount the merchant refunds. That credit will be applied to any other charges you have made, thereby reducing the amount you will have to pay your creditor on your next bill.

However, I would caution against going out and spending that amount before you actually receive your refund. Merchant refunds can sometimes take longer than we, the consumers, might like. In addition, it could be that you won't receive the entire amount back, depending on the merchant's policy for returns. I would hope that it wouldn't be all that much, but I don't have any way to know that from what you have told me.

Another reason to wait is if you are counting on that refund to pay for a purchase you are planning to make that you would not be able to pay for in full when the bill comes. You have been doing a great job of paying off this credit card in full and I would hate to see you in the position of not being able to do that because your refund has not yet been processed.

Sit tight and wait for the merchant to give you your refund. Once it has posted, you will have that amount to spend as you see fit.

One caution, however: You won't be able to have that money sit there forever as a slush fund. Federal banking regulations require banks to refund any credit balance if it remains more than six months. 

Be wise with your credit!

See related: Top retailers' return and receipt policies, Complaints data show which cards pay refunds most, least often

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Published: December 19, 2015

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Updated: 10-27-2016

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