Why refunds take so long to post to credit, debit cards: Money Matters

I'm curious about why refunds for charges made on a credit card generally don't show up on your statement for seven to 10 "business days," while the original charge shows up immediately when the charge is made, no matter what day of the week it is.

Q: I’m curious about why refunds for charges made on a credit card generally don’t show up on your statement for seven to 10 “business days,” while the original charge shows up immediately when the charge is made, no matter what day of the week it is. In both cases, the vendor processes the transactions electronically on the same terminal.

D.S., Beachwood

A: It’s understandable that this would leave a lot of people scratching their heads or even frustrated.

There are two primary reasons:

The easy one: Merchants don’t have as much motivation to process a refund as they do to process a purchase that will put money in their pockets.

The second reason: It’s a bit of an illusion. When you make a purchase and your card is swiped, it sends a temporary authorization or hold to your bank. The transaction will show up as a “pending” transaction almost immediately. But the transaction that was authorized actually doesn’t completely process for perhaps a day or two or three.

With a refund, there is no temporary authorization that shows up and needs to be completed. It’s all one transaction. And it processes within a day or two or three after the merchant initiates it.

Something interesting that’s sort of related to this: At some rental car companies, you have to put down a deposit of perhaps $100 or $150 in addition to your rental fee. When you return the car, the deposit is generally refunded within minutes. Clearly, the rental car companies know this is something that’s important to customers. If they don’t refund it immediately, customers may go to rental car companies that do process refunds immediately or don’t charge a deposit at all.

Other merchants could expedite refunds if they wanted.

Q: My husband passed away earlier this year. He had a bank credit card in his name, and several retail credit cards also. Should I close these cards? And is there something I should do with his credit reports? We have had a freeze on each of the credit bureaus.

M.D., Berea

A: What you should do depends on whether you have credit cards in your own name, or whether any of your husband’s cards had unpaid balances.

If you don’t have any cards in your name, I wouldn’t automatically cancel all of them. You want to make sure you have a MasterCard or Visa or Discover or American Express card in your own name. If your husband had a balance on any cards, it may be easy to get your name added to the account, so the bank will have instant comfort that the debts will be repaid quickly.

If there are retail cards that you use for coupons or discounts, such as a Macy’s or a Kohl’s or a gasoline card, you may want to keep it and get yourself added or get your own card.

If there are cards that you have no interest in using, by all means, you should cancel the accounts so you don’t have to worry about them.

To the second part of your question, you definitely should notify one of the three major credit bureaus. That one will notify the other two. Since you both had your credit files frozen, this isn’t as urgent of an issue as it would be if his file was open.

You should just write a note that your husband died, and include his name, Social Security number and date of birth. You should include an official copy of the death certificate. Ask for a confirmation to be sent to you.

The Identity Theft Resource Center has an excellent template you could print out instead of writing your own letter. https://www.idtheftcenter.org/images/documents/LF-117-1.pdf

Pick one of these credit bureaus to send your materials to:

TransUnion LLC
PO Box 2000
Chester, PA 19016

Experian
PO Box 4500
Allen, TX 75013

Equifax
Office of Consumer Affairs
P.O. Box 105139
Atlanta, GA 30348

To reach Teresa Murray, email moneymatters@plaind.com or call or text 216-316-7064. She cannot respond to all queries or comments.

Previous columns: cleveland.com/moneymatters

On Twitter: @TeresaMurray

On Facebook: www/facebook.com/MurrayMoneyMatters

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