See whether store credit still beats a cash refund.
A return is not the same decision as a refund rate. Once the customer
asks, you can send cash, issue store credit, or ship a replacement.
The table keeps the original order, then subtracts the return label,
the unrestockable share, and — for credit — the next item they take
if they redeem.
Order, return and redemption
Credit vs a cash refund
$—
extra kept by store credit versus refunding cash
Completed-sale profit
Cash-refund keep
Store-credit keep
Exchange keep
Monthly credit gap vs refund
Same return, three ways to close it
Path
Cash back
Extra postage
Next-item cost
Keep after this return
vs refund
Cash refund gives the item price back (plus shipping charged if you tick it). Store credit spends the next item only at the redemption rate you typed. Exchange pays the second outbound now. Transparent arithmetic from your inputs — not Shopify’s refund or gift-card policy.
What this checks
Merchants search “should I offer store credit instead of a refund”
because a cash refund looks like the whole order disappearing, and
Shopify’s refund button is the default. Credit keeps the original
payment. The missing piece is redemption: unused credit is breakage;
redeemed credit is another unit of goods and postage. An exchange
pays that postage now.
On the defaults — $48 item, $6 shipping charged, $14 cost, $7 return
label, 85% restockable, 70% of credit redeemed, processor keeps the
original fee — store credit keeps $22.64, an exchange keeps $16.64,
and a cash refund keeps −$11.36. Credit’s gap versus refund is $34.00
on this return and $408.00 across 12 returns. Change the rates from
your own statements and gift-card report.
Should I offer store credit instead of a refund on Shopify?
Store credit keeps the original payment in the shop. The cost is the next item they take if they redeem, plus the same return label and restock as a refund. On the calculator defaults ($48 item, $7 return label, 85% restockable, 70% redemption) credit keeps $22.64 after the return and a cash refund keeps -$11.36. That is arithmetic on your inputs, not advice to refuse refunds.
Is an exchange cheaper than store credit?
An exchange pays the return label and a replacement outbound now. Store credit only spends COGS, pack, and postage if they come back. When every credit is redeemed and the returned unit is fully restockable, the two paths leave the same amount. If some credit expires unused, credit keeps more.
Does Shopify Payments refund the processing fee?
It depends on the processor and the refund. Shopify Payments often returns its fee when you refund the order; PayPal often keeps it. The processor-fee-kept input is 100% by default so the table stays conservative. Set it to 0% if your statement shows the fee coming back.