Cost-free loan on card?

aroominyork

Last week I booked a cancellable hotel room on hotels.com and paid on my card. A couple of days later I needed to cancel it. It seems to be that the refund will post on my next card statement as a credit, which will 'pay' for last month's other debits on the bill, while the payment to the hotel, showing on the same statement, will not need to be paid until the following month. The net effect is a month's interest-free loan of the hotel booking cost.

Is this correct, and if so do credit card companies keep an eye out for this and view it as a form of abuse/contravention of their terms?

CliveOfIndia

Well, assuming you always pay your credit card in full every month anyway, you always do get an interest-free loan.  As is always stated in the literature, it's "up to" 56 days, depending on when in your billing cycle the transaction occurs.

There's no need to overthink this - when the statement arrives, just pay the full balance as detailed on the statement and you'll be fine.  Some cards treat a refund as a "credit", some treat it as a "payment" - a subtle distinction, but don't assume that you can discount the amount you need to pay by the amount of the refund.  It also depends on when the refund hits your account.  Just pay the full amount as detailed on the statement and all will be well.

aroominyork said:

Is this correct, and if so do credit card companies keep an eye out for this and view it as a form of abuse/contravention of their terms?

Deliberately putting your account into credit is against the T&Cs, and could in theory result in the account being closed (though this is uncommon in practice).  However, if a refund results in a credit balance then this doesn't matter - card companies expect and allow for this.  If you do end up with a credit balance you can either request a refund to your bank account, or else just spend it in your usual routine spending cycle

born_again

Either name the card provider or speak to them.
Not all will take refunds as a payment, to a previous bill.

aroominyork

born_again said:

Either name the card provider or speak to them.
Not all will take refunds as a payment, to a previous bill.

Nationwide. But it's not a strategy I plan to use - it was just a thought about whether it's an open or closed loophole.

CliveOfIndia

aroominyork said:

born_again said:

Either name the card provider or speak to them.
Not all will take refunds as a payment, to a previous bill.

it was just a thought about whether it's an open or closed loophole.

It's not a loophole, it's just how refunds are processed.  When the statement arrives just pay the full amount that's printed on there and you'll have no issues.

SuperAllyB

Was the payment definitely taken?  I usually find cancellable rooms take the details at the time but not the payment until a few days before the actual date.

aroominyork

CliveOfIndia said:

aroominyork said:

born_again said:

Either name the card provider or speak to them.
Not all will take refunds as a payment, to a previous bill.

it was just a thought about whether it's an open or closed loophole.

It's not a loophole, it's just how refunds are processed.  When the statement arrives just pay the full amount that's printed on there and you'll have no issues.

I would call it a loophole if I could have a £5k credit card bill, book £5k worth of hotel rooms today, cancel them tomorrow and not have to make any other payments on my next bill while incurring no interest. 

SuperAllyB said:

Was the payment definitely taken?  I usually find cancellable rooms take the details at the time but not the payment until a few days before the actual date.

Depends whether you take the 'pay now' or 'pay at hotel' option.

CliveOfIndia

aroominyork said:

I would call it a loophole if I could have a £5k credit card bill, book £5k worth of hotel rooms today, cancel them tomorrow and not have to make any other payments on my next bill while incurring no interest. 

As per my first comment, you need to be careful about this.  Some cards will process the refund as a payment, but some will process it as a credit.  In the latter case you would still need to make the full payment of (in your example) £5K.  This would then leave you with a £5K credit balance, which you could either spend or get refunded to your bank account.

It'll be obvious how the refund is treated when you get your next statement - it'll either show the outstanding balance as £5K or zero, depending on how they process the refund.  As I said, just pay the full balance as shown on the statement and you won't have any problems.

aroominyork

CliveOfIndia said:

aroominyork said:

I would call it a loophole if I could have a £5k credit card bill, book £5k worth of hotel rooms today, cancel them tomorrow and not have to make any other payments on my next bill while incurring no interest. 

As per my first comment, you need to be careful about this.  Some cards will process the refund as a payment, but some will process it as a credit.  In the latter case you would still need to make the full payment of (in your example) £5K.  This would then leave you with a £5K credit balance, which you could either spend or get refunded to your bank account.

It'll be obvious how the refund is treated when you get your next statement - it'll either show the outstanding balance as £5K or zero, depending on how they process the refund.  As I said, just pay the full balance as shown on the statement and you won't have any problems.

And as I said, I am not planning on doing this - just interested. I do pay my full balance but there are plenty of people who cannot, so lecturing them isn't very useful. End of thread so far as I am concerned.