‘My refund has been sent to a credit card that I cancelled’ – your rights to lost money

Thanks to Covid, traders have been processing significant numbers of refunds due to events, such as holidays and weddings, being cancelled.

In many cases, these refunds have been sent back to the credit cards used to pay for the purchase – but this has caused a new problem to emerge in relation to card purchases.

When a trader provides a refund, it usually goes back via the same method as the original payment. So if you pay by credit card, the refund is sent back to that card.

However, many people have cancelled credit cards during the pandemic and have therefore found they cannot access the cash.

So what happens to your refund?

Will I get my money back?

The good news is that your refund is safe, as the money will simply be put into a holding ­account by the card provider.

The bad news is that it can take a long time to retrieve the money.

My advice, if you’re waiting for a refund for goods or services you paid for with a card you have now cancelled, tell the trader immediately and ask for the refund to be paid via an alternative method.

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Positive balance credit card accounts

When a refund is processed back to a card, it can create a positive balance on your account – usually when you have already paid the most recent card bill.

This potentially presents issues as credit cards are not designed to ‘hold’ money in the same way as a current or savings account.

For this reason, consumers are not encouraged to hold positive balances on a credit card.

If your card has a positive balance and you are likely to use it again soon, your next purchases will rectify the situation.

But if you are not planning to use your credit card again in the short-term, ask the card company to transfer the surplus to your ­current account. Do not withdraw the money via an ATM as this may attract fees.

Credit card cash withdrawals

Financial experts warn that you should not get money out from a credit card as it can have a major impact on your credit rating.

This is because there is a very high interest rate attached to withdrawals and companies will flag any withdrawals up, impacting a customer’s credit file.