You might come across this situation where you have purchased something online using your Credit Card, and later didn’t like the product and returned it or canceled the order altogether. But, by that time, the credit card bill has generated.
You do get a refund back to your card. But what about the already generated bill? Do you need to pay it fully? Or you can pay a lesser amount and it will be adjusted? Read along to find out:
This was originally posted by Aditya Rajput on 30th October 2020 on our FinTalks Facebook Group.
Posting this here since a lot of people here get confused about how much they need to pay if they get a refund after the credit card’s bill generation date. I see similar posts every now and then. I’ll consider multiple scenarios here and I’m pretty sure, your case will be covered as well.
There are two kinds of charges:
1. Late Payment Fees.
2. Interest Charges.
It will be levied if you don’t pay the minimum amount by 3 days after the bill due date. E.g. Bill’s due date is 5th November, you need to pay your card by 8th November otherwise a flat late fee will be levied.
Now, this also means if you miss the due date, you can still pay your cc without any fee. This 3 days grace period is there because a lot of payment methods take up to 3 days to credit your amount in your card.
Technically saying, if your payment is instant like in the case of CRED, you can pay on 8th November as well. Don’t take such a risk though.
Once you have paid the minimum due, there cannot be a late payment fee at all. The credit card issuer will now calculate how much amount was not paid and levy interest on that amount only. They’ll subtract all the credits/refunds in your card after the bill generation date till 3 days after the due date. Now, whatever amount is left, be ready to pay interest on it.
Once the minimum due is paid. You need to pay the pending bill in excess of the refunds. I’m taking some example use-cases below.
Your bill is 10k, the minimum due is 1k and you receive a refund of 20k after bill generation. How much do you pay? The answer is 1k. The minimum due has to be paid, doesn’t matter if the refund is greater than your actual bill.
Your bill is 10k, minimum due is 2k (for whatever reason), you receive a refund of 9k. Now, you cannot just pay 10-9 = 1k, this will attract a late payment fee but NO INTEREST. Read Rule 101 again.
Your bill is 10k, the minimum due is 1k, you receive a refund of 7k. Now, you simply have to pay 10k-7k = 3k. That’s more than minimum due, no late fee, no interest.
Your bill is 10k, the minimum due is 1k, you receive a refund of 5k. Now, you simply have to pay 10k-5k = 5k. If you pay less than it, let’s say 3k then NO LATE FEE will be levied because you have already paid the minimum due, but interest will be imposed on that pending 2k payment.
In no scenario, you can pay less than the minimum amount due. That’s the thumb rule, I’m not sure if any bank/credit card doesn’t follow the same. You guys can correct if something’s wrong based on your experience and not assumptions.