When you return an item to a retail store, that retailer may issue your refund in the form of merchandise credit, as opposed to refunding the credit card you purchased the item with, or a refund in cash.
Merchandise credit is when you're given store credit for the same amount as your refund, and it can only be used at that retailer or family of brands.
This store credit may be offered via a swipeable card or a printed certificate.
Is a merchandise credit a refund?
Merchandise credit is one type of refund, yes. Though you're limited to spending that credit only within the issuing retailer's ecosystem. There may be other restrictions to consider, so you'll want to read their refund policy.
Why do stores give merchandise credit instead of cash when you make a return?
As a customer you may prefer your refund in the form of cash; however, there are several reasons why a store would issue merchandise credit rather than a cash refund:
- Secures revenue. When the refund is limited to their store alone, it guarantees that the previous revenue is not lost to another retailer. Their goal is to get you back into the store to use that credit, and potentially find additional items to purchase while you're there. Those items may exceed the amount of the merchandise credit, which a customer would pay for with another payment method.
- Simplifies the refund process. Businesses may find that doing exchanges, cash returns and refunding credit cards adds a layer of complexity they may not want to take on. By offering store credit, they minimize some of the steps that other types of refunds may require.
- Helps avoid return fraud. The National Retail Federation (NRF) (PDF) reported that 10.3% of online returns are fraudulent, totaling more than $78 billion in 2021. If a retailer gives merchandise credit instead of cash for a return, it may dissuade people who would otherwise try to commit return fraud.
- Offers customer retention opportunities. Businesses that maintain a high level of customer service and offer creative ways for shoppers to use their merchandise credit may be looking for customer retention opportunities. When a return is initiated and merchandise credit is given, businesses have a second chance to impress you – either with their customer service or product offerings. By keeping the customer in the store (or website), they may find ways to cultivate customer loyalty.
Can I use merchandise credit online?
This depends on the retailer's individual return policy. Retailers that have both online and brick-and-mortar stores may limit the use of merchandise credit to in-person shopping only. If you're unsure where you can use your merchandise credit, refer to their return policy, which is usually posted on their website as part of their terms and conditions, or near the checkout area of the store.
Is merchandise credit the same as a gift card?
Merchandise credit is similar to a gift card but is issued in the amount of the returned item, rather in a pre-determined amount. Just like a gift card, merchandise credit can be used same as cash to purchase items from only that issuing retailer, or their family of brands.
The biggest difference is that you can buy a gift card for someone else as a gift and you can determine the amount you want the card to be. Merchandise returns are for the person returning an item and the credit amount is limited to the value of that returned item.
Merchandise credit is a common type of refund that many retailers offer to their customers. The credit can only be applied to merchandise within that retailer's store or retail ecosystem. Though some customers may prefer having other refund options such cash or a refund to their credit card, retailers find that merchandise credits are ideal for keeping the original revenue, simplifying the return policy and avoiding return fraud.