Why you should get a refund and not store credit

When you make a return, many retailers want to refund your money to store credit or a gift card, but here’s why you don’t want to do that.

I had to return an item the other day on Amazon. It was just a little USB hub and it was fine, but it was a little bulkier than I thought it would be, and I had already found something smaller.

No worries, Amazon will let you return more or less anything, which is nice, despite what we all know that happens to returns. In fact, the problems with inventory management have gotten so bad that I’ve heard that it’s sometimes possible to not even have to return items to get a refund. Hello late stage capitalism!

Anyway, during the return process, I got asked a question, euphemistically titled, “How can we make it right?”

It was a question with one option: “Refund to your Amazon account balance”

I’m sure that most people just click the Continue button. But wait, there’s another option there at the bottom! “Refund to your original payment method”

This is the option you want to choose. Here’s why.

How spending money in different ways feels different

I’ve often talked about how spending money can sometimes feel different. I think for most people, spending money from your checking account (or cash) feels a little more real than, say, putting a purchase on a credit card.

The reason for this is simple: with a credit card, you haven’t actually bought the thing yet! You’re just making a promise to pay it in the future. Separating the purchasing from the payment is a brilliant move, and causes people to spend much more than if they had paid with their own money at the time of purchase.

This is why I will never stop telling you to stop using your credit card for everyday purchases. Every one of your excuses are wrong, and demonstrably so.

Gift cards feel like free money

Gift cards are free money. Well, they’re not, but they certainly feel like it.

Gift cards work like credit cards, in that it separates the purchase from the payment. Except the difference between gift cards and credit cards is that you’ve paid for the thing before you’ve purchased it!

Now that’s a recipe for making money feel free!

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And the same thing is true with store credit. Store credit is no different from a gift card to that store. It will feel like free money.

So what’s wrong with free money?

The problem with money feeling free is that it’s not. Money is never free, even money that fell from the sky.

There is always an opportunity cost to money. If you use your money for this it means that you can’t use your money for that.

So just because you spent money on something and then returned it for a refund, that doesn’t mean that that money is as good as spent. In fact, it’s no longer spent!

So getting a store credit tricks you into thinking that the money has already been spent, making you more likely to spend it freely, without carefully considering the purchase like you would (hopefully) do with another purchase.

You don’t buy everything on Amazon (right?)

Another issue with getting store credit is that you can only spend that money at that store. Money in an Amazon gift card can only be spent at Amazon.

And yeah, I know Amazon seems to sell everything, but they don’t. So money in an Amazon store credit is worth less than money in your checking account, because there is marginally less that you can do with it.

They don’t want you to get a refund

Amazon isn’t stupid; they know all of this.

This is why they do psychological tricks like giving you two options, while vastly promoting one over the other.

I mean, scroll up and look at that image again: is that not designed to make you do one choice over the other?

What if our election ballots looked like that?

I mean, given who’s running for Secretary of State in some places, I wouldn’t actually be that shocked if something like this happened. But that doesn’t make it right.

As I’ve long said, when companies promote something heavily, you can assume it’s in their interest, but you can’t assume it’s in yours.

And this is one of those cases.

So the next time you get a refund from anywhere (not just Amazon), make sure you get a refund to your original payment method. It might take longer, but maybe not.

After all, I got a refund from this return two hours after returning it. I think that’s fast enough.

Update: I had forgotten that I had actually purchased this using an Amazon gift card, so it went back into my Amazon balance anyway. Dammit.

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