You are correct; the language is very loose in that regard, simply stating that refunds will be issued back to the card. There is an assumption that they're talking about the same card, since it's in the same section as what talks about the purchases. The retailer language is far more precise and detailed.

So perhaps it is not fraud per se to make charges on a points-earning card and have those charges credited back on a different card. But knowing that the merchant isn't allowed to do so (but might because they don't know any better), and doing so for no other purpose than gaming the system (buying things knowing that you're going to return them)... it's at the very least ethically questionable.