The customer already paid full price, so when they claim a discount after checkout the difference is owed back to them. Shopify works out the exact amount. You decide whether it goes back to their card or as store credit, and whether card refunds wait for your approval.
An example
A customer paid $100 and claims a 15% discount. Shopify applies 15% to each unshipped item, recalculates the order including tax, and shows that the customer has overpaid. Around $15 is owed back, and the exact figure is Shopify's, including any tax difference.
Tacey reads that figure from Shopify's own balance for the order. It never calculates the refund itself.
Choose where it goes
Editing Tools → Tools → Apply a discount → How the customer gets the discount back.
Back to their original payment method (the default). "The $15 goes back to the card or wallet they paid with, as a normal Shopify refund. Every refund is written to the ledger, whether or not it succeeded."
Store credit. "No cash leaves your account. The same $15 is added as Shopify store credit on the customer's account, to spend on their next order with you." This needs store credit turned on in Shopify and Shopify's new customer accounts.
The customer is told which one before they confirm, for example "The difference will be refunded to your original payment method. We'll work out the exact amount."
When a card refund is sent
This depends on Refund customers automatically, in Editing Tools → Global settings → Refunds.
Off (the default). Nothing is refunded yet. The order shows A refund is waiting for your approval and appears under Action needed. You click Approve refund on the order and Tacey refunds exactly what Shopify says is owed at that moment.
On. Tacey waits until the customer has stopped changing the order for about 15 minutes, checks the amount with Shopify again, and refunds it. The refund goes out 15 to 30 minutes after their last change.
When store credit is issued
Straight away, when the customer confirms. Store credit does not wait for approval. The customer sees "The difference has been added as store credit to your account."
Safety checks
Never more than they paid. If the amount owed would exceed what Shopify allows to be refunded on the order, nothing is sent and the ledger shows The refund did not go through for you to look at.
A guest order cannot receive store credit. With store credit chosen, a guest order gets no refund at all, not even to the card. The customer is told "Your order was updated, but your store credit couldn't be added automatically. We've been notified and will follow up with you." and the order appears under Action needed for you to settle.
A cancelled order does not get store credit. If the order was cancelled while the discount was being applied, no credit is issued and the ledger says so.
Nothing owed, nothing sent. If Shopify calculates that nothing is owed, no refund is made and the ledger shows No money moved.
Where you see it
The order's Reconciliation ledger shows Discount applied, with the money result: the amount once refunded, Refund owed while waiting for you, or The refund did not go through if it failed. Refunds that went out also count toward Refunded after checkout on Home.
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