How are refunds applied?

faddy

I know that when a normal repayment is applied it goes towards paying off the statement balance before any recent transactions not on a statement, even when the statement balance is at a promotional rate and recent transactions are not. Does the same apply to refunds or is a refund applied directly to the transaction it relates to even if it hasn't yet appeared on a statement?

The reason I'm wondering is that I've accidentally used Curve to take a payment from a card which otherwise has only a promotional balance, and I'm wondering whether to "go back in time", which will refund to the card and charge a different card, now or after waiting for next statement to be produced.

Terry_Towelling

I thought about having a stab at this one but was a bit stumped. Looks like everyone else was too. Still, I'll have a go. Two caveats - No 1) I'm basing my answer around a 0% promotional balance, a single new sale and a single refund. No 2) It's mostly guesswork centred around the approach of Barclaycard.

A refund is not a 'payment' so the normal payment allocation rules will presumably not apply. It will presumably only be used to reduce the value of any other sale transactions on the account that have yet to be billed. So in the scenario described, the refund will 'cover off' the sale when neither have appeared on a statement.

If the refund hits the account in a later billing cycle, I imagine things may be more problematic and the prospect of being charged interest might just enter into the equation - depending on how much you pay towards the balance that contains the original sale and who your issuer is.

I can only really relate what Barclaycard has told me about the way they treat new spending on a card that also has a promotional balance (e.g. a 0% BT). They told me, as long as you meet the minimum payment and your payment also covers all of the 'new' spending that has been billed, you will not be charged interest on that new spending.

So, on the basis that they have advised me correctly, if your refund hit a different billing cycle to the sale, you could be charged interest on the sale unless you paid off at least the value of the sale when it appeared on your statement - regardless of the fact that such sale has been refunded in a later cycle.

I hope that makes sense. Essentially what I'm saying/guessing is that if both sale and refund hit in the same billing cycle, you should be OK; if they hit in different cycles, you may have a problem with interest unless your payments to the account exceed the value of the billed sale and your issuer has the same approach to mixing promo balances with spending as Barclaycard.

I expect your issuer should be able to answer the question but it might just tax them.

Please feel free to shoot me down.

faddy

Thanks Terry, my concern isn't so much that I might be charged interest on the purchase for the short time that I owe for that transaction, but that by having it refunded before the statement date I might be reducing the 0% statement balance rather than the unstatemented interest bearing balance arising from the purchase. I do have a very hazy notion that refunds are somehow matched against the original transactions such that the merchant receives a refund on their transaction fee for the purchase.

What Barclaycard have described to you about repaying the full interest bearing balance being sufficient to avoid interest has been Nationwide's practice for a long time and I recently read on here that Barclaycard had adopted the same but I don't know if any other issuers have? The card I'm concerned with is TSB.

Emily_Joy

faddy wrote: »

What Barclaycard have described to you about repaying the full interest bearing balance being sufficient to avoid interest has been Nationwide's practice for a long time and I recently read on here that Barclaycard had adopted the same but I don't know if any other issuers have? The card I'm concerned with is TSB.

I do know for a fact that Sainsburys' bank and Tesco's bank would count the refund towards 0% promotional balance. Moreover, Sainsburys' are very clear in explaining that if you make any purchases after taking a BT offer the interest will be charged on both BT and the purchase till you clear the entire balance in full.

In other words, the best thing to do is to check the promotional offer paperwork. If you can't locate it, phone them and ask.

faddy

Emily_Joy wrote: »

I do know for a fact that Sainsburys' bank and Tesco's bank would count the refund towards 0% promotional balance.

Unless, presumably, the purchase had appeared on a statement by the time the refund was credited?

Terry_Towelling

Emily_Joy wrote: »

I do know for a fact that Sainsburys' bank and Tesco's bank would count the refund towards 0% promotional balance.

Interesting that they should effectively class a refund as a payment. Is this definitely the case where both sale and refund are processed in the same billing cycle?