I know, it’s the end of the month, you’re a bit strapped on cash, and you have to make that credit card payment – or else!

Now, you think, hey, I owe about $1,000 on my credit card, what if I buy an LED HDTV (55″) for about $1,500, and then return it in a couple of days. Wouldn’t the return count as payment towards my credit card bill? Well, I had the idea yesterday, and that’s why I decided to investigate about it!

I called TD Visa (Toronto Dominion’s Bank Visa Division) and I asked the following question to the assistant on the other line (here name was Lisa, by the way, and she was very, very helpful): “Let’s say I owe $1,000 on my Visa, and then I bought an HTDV for $1,500, and then returned the TV a couple of days later, wouldn’t the refund for the TV considered a payment?”.

To my surprise, she gave a very fast and firm answer: “No, the $1,500 would be used as a credit to your account, and not a payment towards your balance”. I then told her I’m writing an article on my website about it to inform the public about this scenario, and I just wanted to know more information about it since the only answer I could find on this topic on the Internet was on Yahoo answers, which makes the answer completely unreliable. The reason why I was surprised is that I thought that first level assistants will probably not know how to answer such a question.

In any case, I then asked her: “why isn’t the $1,500 considered a payment?” Her answer was that if this is the case, then people will abuse the system and nobody will have to pay his or her credit card bill ever (unless, of course, s/he’s near the maximum credit allowed). So, in case refunds are considered a payment, then people will buy products that are more than their balance every month, and then return them a few days later.

I then proceeded, “but why would the credit card companies care about this, don’t they take a cut that is worth anywhere between 2% or 3% of the whole transaction amount (not to mention, of course, transaction fees)? Isn’t it better for them if people buy more products and return them?” Her answer was: “No, credit card companies have to pay merchants their money from real sales at one point, and if all people are delaying their payments nearly indefinitely, then credit card companies won’t have any money to pay the merchants. Additionally “, she continued, ” merchants suffer from this situation as well, because they will have to sell the returned items at a discounted price”.

I thanked for her time and I started writing this post. And while I was writing it, I started thinking of the very negative side effects that we will have on the economy if credit card refunds are considered a payment.

There is one thing that you should keep in mind, if your credit card bill is $1,000 and one of the items in that credit card statement costs $400, and if you return that item in the next month, then the owing balance will be only $600 (the refund will count towards a payment on your initial bill). Please note that some banks allow this (I know that TD allows it, but maybe it’ll change it’s policy about it), and some banks don’t.

If you have read this post and you still didn’t understand what the answer to the main title is, then let me say it again: “No, credit card refunds are not considered a payment!” and “No, you are not smarter than your credit card company”. Remember that credit card companies have dealt with billions of cases and they have ironed their system to their best advantage, and not yours. So don’t think that there’ll be day where you can sucker them!

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on fadi.el-eter.com.