Credit cards are useful tools, but the accounts do not last forever. There are many reasons that a cardholder would not have the same card over a long period of time, including the loss, theft, or damage of the card. In other instances, credit cards expire or cardholders simply choose to close their account. At the same time, cardholders may eligible to receive refunds long after a particular card number becomes invalid. All of these circumstances bring up an interesting question; what happens when a refund that is applied to a cancelled card?  The answer depends on how the card was cancelled.

When a credit card is lost, damaged, or stolen, the card number changes, but the account information remains the same. The banks continue to link the old card number to the cardholder’s account, enabling the credit to be seamlessly applied. The same is true if the card’s expiration date has passed, and it has since been replaced.

In the event that the cardholder or the bank closes the account, the answer is different. In this case, the cardholder is unable to make new charges, but credits and payments can continue to be applied to the account until the balance is paid off. Once the balance reaches zero, the card issuer may still keep the account active for a period of several months. During this time, any excess payments, or other credits to the account will result in a positive balance. Ultimately, the bank is obligated to remit the balance to the former cardholder in the form of a check.

Unfortunately, the card issuer cannot keep the account active indefinitely. At a certain point, the account becomes completely inactive and merchants who attempt to process credits to these accounts will be unable to complete their transactions. At that point, it is up to the former cardholder to work directly with the merchant in order to receive their credit though an alternate form of payment. In the worst case scenario, the credit will be processed to the now inactive account, and held by the bank.  It will then be up to the former account holder to contact the card issuer in order to request that a check be issued.

There are many circumstances when cardholders should expect a credit back to their account. Goods are returned, and refundable travel plans are cancelled long after the initial charges were processed. By understanding how these credits are applied to canceled credit cards and closed accounts, cardholders can be sure to receive the refund they are expecting.

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