Does a high refund rate hurt my payment account?

Refunds themselves are usually less harmful than chargebacks, but a high refund rate often comes with more disputes. Payment providers watch dispute levels closely, so a rising refund rate is a reason to fix product or delivery issues before they turn into chargebacks.

Should refunds be included in my ROAS?

For decision-making, yes. Revenue that is later refunded was never really earned. Measuring ROAS on net revenue after refunds gives a truer picture of which ads and products actually make money, especially for products with high refund rates.

Refund rate

Refund rate is the share of orders that end in a full or partial refund, a key signal of product quality, listing accuracy and true profit.

What is refund rate?

Refund rate is the percentage of orders where the store gives money back to the customer, either in full or in part. It covers refunds for damaged items, late deliveries, wrong sizes, unmet expectations and plain changes of mind. For an online store it matters because every refund removes revenue you already counted, and often the product cost, shipping and ad spend are lost too. A rising refund rate is one of the earliest warnings that a product, a supplier or an ad promise is off. Payment processors and ad platforms also watch related signals, so keeping refunds low protects both margin and account health.

How to calculate refund rate

Divide the number of refunded orders by the total number of orders in the same period, then multiply by 100. For example, if your store shipped 500 orders last month and 20 of them were refunded, your refund rate is 20 divided by 500, which is 0.04, or 4%. You can also track it by value: if you sold 25,000 in revenue and refunded 1,000, your refund rate by value is also 4%. Track both views, because a few large refunds can hurt more than many small ones. Always compare the same time window and give recent orders time to mature before judging.

What is a good refund rate?

A good refund rate varies by niche, price point and how products are sold. Consumables and low-priced accessories typically see lower refund rates, while apparel, footwear and electronics often run higher because of fit and expectation issues. Rather than chasing a universal benchmark, compare your rate against your own history and across your products. A product refunding far more often than the rest of your catalog usually has a fixable problem. A sudden jump after a new supplier, a new ad angle or a shipping change is a clear sign to investigate before scaling spend.

How to improve refund rate

Start by reading refund reasons and grouping them, since most refunds trace back to a handful of causes. Make product pages honest, with real photos, clear dimensions, materials and size charts, so buyers know exactly what arrives. Make sure ads do not overpromise results the product cannot deliver. Tighten quality checks with your supplier and test samples before scaling a new batch. Send tracking updates and realistic delivery dates, because many refunds come from shipping anxiety. Finally, offer exchanges or store credit where it fits, which keeps the customer and the revenue while still solving their problem.

Refund rate vs return rate

Refund rate counts orders where money went back to the customer. Return rate counts items that were physically sent back. The two often overlap, but not always. A store may refund without asking for the item back when return shipping costs more than the product, which raises refund rate but not return rate. A customer may also return an item for an exchange, which raises return rate without any refund. Tracking both shows whether your problem is product quality, logistics cost or customer service policy, and helps you decide where to fix it first.

Questions

Does a high refund rate hurt my payment account?: Refunds themselves are usually less harmful than chargebacks, but a high refund rate often comes with more disputes. Payment providers watch dispute levels closely, so a rising refund rate is a reason to fix product or delivery issues before they turn into chargebacks.
Should refunds be included in my ROAS?: For decision-making, yes. Revenue that is later refunded was never really earned. Measuring ROAS on net revenue after refunds gives a truer picture of which ads and products actually make money, especially for products with high refund rates.