Refunds, Voids and Chargebacks
Rasika Lakshan ·
Last updated:
This is general information, not legal or tax advice.
Who this is for: Small merchants who refund customers regularly and want to know what a refund costs, and why refunding quickly can matter.
In short: Providers say the processing fee on the original payment is generally not returned when you refund: Stripe, Square (since a 2023 policy change) and PayPal all say so. Stripe says you can cancel a payment before it is completed at no cost. A chargeback is different: the customer's bank reverses the payment, and Visa advises refunding promptly if a cardholder with a valid dispute contacts you.
Three different things can happen to a card payment after it is taken: you can cancel it, refund it, or lose it to a chargeback. The fees differ for each. This guide uses Stripe’s, Square’s and PayPal’s own pages and Visa’s merchant guidelines, read on 2026-10-16. Policies change, so confirm with your provider. This is general information, not financial advice.
Cancel, refund or chargeback
- Cancel (sometimes called a void). Stripe’s docs say you can cancel a payment before it is completed at no cost, and in the Dashboard you can cancel a payment when its status is uncaptured. To cancel a payment with other statuses you must use the API. The pages we read from Square and PayPal do not describe a void, so ask your provider.
- Refund. You return money to the customer after the payment succeeded. Stripe says refunds can only be sent to the original payment method and cannot exceed the original charge, and that issuing a refund after success might incur a fee depending on your pricing. A refund is something you control.
- Chargeback (dispute). The customer’s bank reverses the payment. Visa says the acquirer deducts the amount from the merchant account if the dispute is valid. See how a Visa card dispute works.
What providers say about fees on refunds
| Provider | Published position |
|---|---|
| Stripe | Processing fees from the original transaction aren’t returned. Depending on your pricing and fee schedule, issuing a refund may incur fees: Stripe’s support page says that for businesses on standard pricing there may be fees when bank transfers are used, and for all other payment methods there are no fees for issuing refunds. Businesses on IC+ pricing may have refund fees depending on their fee schedule. |
| Square | Its April 2023 policy update says processing fees will no longer be returned when sellers issue a full or partial refund. Square suggests its free eGift Cards as store credit with no additional processing fees. |
| PayPal | If you refund a commercial or invoicing transaction, there are no fees to make the refund, but the fees you originally paid to receive the payment are not returned to you (both full and partial refunds). |
Stripe explains why: much of the cost of processing is driven by fees from banks and payment networks, which set rules about which fees apply on refunded payments, and in many cases banks and networks keep the entire upfront cost of a refunded transaction. Square says its change reflects that it does not recoup in full processing fees from network and payments partners on refunds.
What this means in practice
If you refund often, the lost processing fee is a real cost. For a $100 sale at a 2.9% + 30¢ rate, the original fee is $3.20, which stays with the provider after a refund. That is arithmetic from published rates, not a quote for your account; see Stripe fees explained and Square fees explained for the rates, and chargeback fees by provider for dispute costs. Stripe’s docs say canceling before a payment is completed is at no cost, so for a business that can authorize first and capture when the order ships, canceling an unshipped order avoids a refund. Whether this works depends on how you take payments.
Refund before a dispute, not after
Visa’s guidelines say that if a cardholder with a valid dispute contacts you directly, you should act promptly, issue a credit as appropriate, and tell the cardholder to expect it. For condition 13.6 (Credit Not Processed), Visa says common causes are not issuing a credit, issuing it but not depositing it in time to appear on the cardholder’s next statement, or leaving a receipt that should have been voided unprocessed; the way to avoid it is to process credits and reversals promptly.
What we did not verify
We did not find an official Square or PayPal page defining a void, and we did not verify whether fees apply to cancelling an authorization at Square or PayPal. We did not read Square’s page on payment disputes or any provider’s refund time limits, apart from Stripe’s. Check your provider’s refund and void options before changing your process.
Frequently asked questions
Do I get the processing fee back on a refund?
Stripe says its processing fees from the original transaction are not returned. Square's policy update says processing fees are no longer returned on full or partial refunds. PayPal says there are no fees to make a refund but the fees you originally paid to receive the payment are not returned.
Can I avoid the fee by canceling?
Stripe says you can cancel a payment before it is completed at no cost, while refunding a payment after it succeeds might incur a fee. In the Dashboard you can cancel when a payment is uncaptured.
What is a void?
The pages we read do not define a void. Stripe calls canceling an uncaptured payment a cancellation. Visa's guidelines refer to a transaction receipt that should have been voided or cancelled. Ask your provider what its void option does and whether fees apply.
Does Square return fees if I give store credit?
Square's policy update suggests its free eGift Cards as a way to provide store credit with no additional processing fees.
Is a refund the same as a chargeback?
No. A refund is something you issue. A chargeback (Visa calls it a dispute) is the customer's bank reversing the payment, and providers may add a fee. See our guide to the Visa dispute process.
Why should I refund quickly?
Visa says that if a cardholder with a valid dispute contacts you directly, you should act promptly and issue a credit as appropriate, and that disputes for credit not processed can come from refunds that were not issued, or not deposited in time to appear on the next statement.
Keep reading
Sources
- Stripe Docs: Refund and cancel payments (checked 2026-10-16)
- Stripe Help: Understanding fees for refunded payments (checked 2026-10-16)
- Square: Policy and pricing updates (checked 2026-10-16)
- PayPal: Business fees (US) (checked 2026-10-16)
- Visa: Dispute Management Guidelines for Visa Merchants (June 2024) (checked 2026-10-16)