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A refund policy is a set of guidelines that tell your customers how to get funds back after returning a purchase to your store. A standard policy for a small business might cover things such as timelines, how refunds are processed, and what customers need to do or provide to get their funds.
Refund policies are important because they help your customers make purchasing decisions and build trust and transparency around your business. Read on to learn more about refund and return policies and see an example of a refund policy template.
Note: Our refund policy example is just a starting point, and is not meant to be used as a return or refund policy template or legal advice.
Why is a refund policy important?
Refund policies are an essential part of your business practice and communications. For businesses and shoppers, buying online doesn’t always go as expected. In cases where items arrive damaged, are lost in transit, or your customer simply isn’t satisfied, having a refund policy reassures your customers that they’ll have a fair process if issues arise.
Remember that a refund policy is an opportunity for customer service. It can leave an impression before someone even buys from your site. If your refund policy is unclear, it can harm customer experience and make your roadmap for processing requests difficult. Depending on where you’re located, it may also be a legal requirement to outline a refund or return policy.
Refund vs. return policy
While a refund policy and return policy are similar, they’re not the same thing. A return policy explains how and when a customer can return an item purchased from your store. A refund policy caters to the monetary aspect, or rather how a customer can receive funds back to their account after returning an item or canceling a service.
A good refund policy may cover the process of both refunding and returning purchased goods, as both processes are usually interlinked.
See our guide to writing a return policy
Types of refunds
The types of refund you offer might depend on what you’re selling. There are three common types of refunds.
Full refunds: The buyer receives all of their money back from a purchased good or service.
Partial refunds: Customers get a portion of their funds back, such as 50% or the purchase price minus shipping or restocking fees.
Credit refunds: Shoppers get a store credit equal to the value of their purchase, to be used in your store. This can be in the form of a gift card, special code, or coupon.
Refunds for physical items
This includes anything a buyer will physically receive, such as clothing, food, stationery, jewelry, and more. In the case of physical goods, it’s typical to offer full refunds, exchanges, or credit options in the case of an unsatisfactory purchase.
Even in the case of perishables and other items that can’t be resold, like baked goods, some business owners choose to absorb lost revenue and offer partial refunds or store credit. What you choose to do depends on your bottom line—make sure you can handle that financial loss before you offer the option.
Refunds for services or projects
This usually pertains to providing a service to clients, such as social media management, accounting, copywriting, or coaching. It can be harder to decide when and if you allow refunds for project-related work, as a service typically can’t be undone after it’s completed.
Whether you allow refunds may link to your client agreements and what you and your clients mutually consider as customer satisfaction or completed work. You can outline these details in any proposals you create for clients.
If your clients pay on an appointment-by-appointment basis, you might offer refunds if you need to cancel or reschedule last-minute, and a one-time credit if your client cancels late. For longer-term projects, like wedding and engagement photography or event planning, consider taking a non-refundable deposit upfront. That way, you’re still paid for some of your time if the client isn’t satisfied.
Writing your policy: What should a refund policy include?
If you’re ready to write your refund policy, there are some basic guidelines typically useful to include.
Forms of refund available: State whether you offer cash refunds, store credit, or card refunds, the latter being the most common type for online stores.
Where a refund can be processed: If your store has a physical location you should also specify whether in-store purchases are eligible for refunds online and vice versa.
What is needed to process a refund: Typically customers need to show some type of proof of purchase to obtain a refund, such as a receipt or order number.
Refund policy template and examples
Here are two examples of refund policies. Note that these templates are not official legal advice and are rather a guideline of how you could structure your own business policy.
Services or project refund policy template
“Didn’t love our service? We provide a customer satisfaction guarantee, or your money back. For refunds and issues, reach out to [EMAIL] to fill out our Customer Care Form. Refund requests must be made within 14 days of service completion. If your refund request is accepted, please allow 3-5 business days for a refund to appear on your original method of payment.”
Products or physical goods refund policy template
“We accept online returns within 30 days of purchase. Returned items are eligible for a full refund, exchange, or store credit. Items must be received undamaged, in unused condition, and in their original packaging.
To make a return, place your order number and return details into our Returns Form. You can find your order number in your original confirmation email. Shipping and return options can also be found in the form. After receipt of your item, we process returns within 7 working days. Funds received will be sent to your original method of payment.”
Be mindful that these templates are not legal advice. Always refer to your state laws or retail regulations for more specific guidance on policy language, or consult with a lawyer for clarity.
See examples for appointment cancellations and refunds
Questions to consider before writing your refund policy
Before you take your refund and return policy online, there are a few factors you should consider to make sure it’s solid, comprehensive, and easily understood by the customer. Ensure your policy includes answers to the following questions.
How long should the refund window be, and will I allow refunds indefinitely?
This is dependent on your product and wider policies, but a standard returns window is usually around 30 days. This allows enough time for the customer to review the item and decide whether it’s satisfactory. For services and projects, the window might be tied to specific dates of service or project deadlines.
When does it make sense to offer no refunds, and what makes something ineligible to return and refund?
Sometimes the type of product sold may make it ineligible for a refund. Perishable items, certain items of clothing and accessories (such as underwear, bikinis, earrings, and facial jewelry) can raise hygiene concerns if returned or resold to another customer. Additionally, certain terms of sale may make an item refund ineligible, such as a final sale item.
If items in your store fit this category, be sure to list on your website why it’s ineligible so customers are aware.
How will I verify returns?
It’s important to have policies in place to avoid fraudulent returns. In rare cases, customers might attempt to return items that are used, stolen, or damaged, or claim goods haven’t been received.
You can manage this by clearly stating what condition the item needs to be in for a return, like “unworn” or “no visible damage or defects” or requesting photo evidence of damaged items. Lost or stolen packages are more complicated, as it’s difficult to verify. In these cases, you may double-check claims alongside evidence from your courier, and choose to refund directly to the purchasing card or offer store credit.
Are there legal requirements for a refund policy?
This is dependent on where you’re located, and may differ by state or the financial authority where you live. Reach out to your local government authority or a small business group for specific requirements. If you have access to legal advice, you could also get input from a lawyer when formulating your policy to make sure it doesn’t breach guidelines.
Where should I put the refund policy?
Make sure your policies are stated clearly on your website. It might be helpful to list in its own section of an FAQ, Help, or Contact page. You can also link to it in your website footer and order confirmation emails, so the policy is easy to find everywhere customers might interact with you.