Credit Card Points from Refund

Question

I had an interesting experience recently while apartment shopping. I found one I liked, and put in an application and paid a $150 security deposit, which I charged to my credit card. I then decided on another apartment, and canceled my first application. However, the charge on my credit card was not cancelled and instead I received a check of the full value.

This means I spent $0 and received $0.15 from the credit card company is points. What's to stop me from repeatedly doing this? For example, why can't I go to my friend's business, buy $10,000 from him/her, then get a refund by check?

Answer 1

Because your friend isn't going to like the ~2% charge they have to pay to the credit card company on the $10,000 purchase.

Credit card companies make money off of transactions. The cardholder normally doesn't pay any transaction fees (and in fact can make a profit via rewards), but the merchant has to pay a certain amount of money to the credit card company for the transaction. In this case, the apartment owners ate the charge, likely because it was easier for them to send a check than to refund the cost of the fee through the credit card company.

If you started doing this a lot to take advantage of this, I would imagine they would get smart and refuse your business (it'll be pretty obvious what you're doing if you're not signing any leases).

Answer 2

That transaction probably cost the merchant $0.50 + 3% or close to $5. They should have refunded your credit card so they could have recouped some of the fees. (I imagine that's why big-box retailers like Home Depot always prefer to put it back on your card than give you store credit)

Consider yourself lucky you made out with $0.15 this time. (Had they refunded your card, the 1% of $150 credit would have gone against next month's reward)

Once upon a time folks were buying money from the US Mint by the tens of thousands $ range and receiving credit card rewards, then depositing the money to pay it off.. They figured that out and put a stop to it.