A refund is a transaction in which a merchant returns all or part of a customer's payment, normally to the same card, account or wallet that was used to pay. It is initiated by the merchant, unlike a chargeback, which is initiated by the customer through their bank.
Why it matters
How and when a refund arrives is a common source of support requests. The merchant triggers it through a gateway dashboard or API, the processor passes it to the issuer, and the issuer credits the customer, which can take several business days. Partial refunds, multiple refunds against one order and refunds after settlement are all common. Fees paid on the original sale may or may not be returned by the processor, depending on the provider. Consumer-protection laws on refund rights and deadlines vary by country.
Example
A request to a payment API might look like this:
POST /refunds
{ "payment_id": "pay_123", "amount": 1500, "reason": "item returned" }The response gives a refund ID and a status such as pending or processed. Sending the same request twice could refund twice, so many APIs accept an idempotency key.
Common mistakes
- Refunding more than the original amount or refunding the same order twice.
- Telling customers money is back instantly when banks take days.
- Ignoring the dispute window and letting the customer file a chargeback instead.
Rules vary by country; this entry is a definition only, not legal advice.
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