How To Process Refunds for Digital Products

Are you trying to figure out how to handle refunds for digital products?

Refunds are an unavoidable fact of life for online sellers. So it’s important to have a sound return and refund policy and process in place for your eCommerce store.

This guide can help.

🔎 In this article, I’ll cover:

Why Allow Refunds for Digital Products

Digital commerce operates a bit differently than traditional commerce. For instance, you don’t have to worry about faulty goods or similar issues that you might when offering physical products.

However, that doesn’t mean you shouldn’t allow refunds. To succeed in selling digital content, you need a good reputation and happy customers. How you handle refund requests can be a big part of this.

Refusing to issue refunds or having a no-refund policy for digital items can hurt your reputation. It may also present an issue with consumer protection laws and Consumer Rights Act legislation in various countries aiming to protect consumers from unfair business practices.

There are a handful of reasons to offer either partial refunds or full refunds on digital products. In addition to protecting customers, it helps you:

• Gives consumers peace of mind & builds trust
• Stand out from your competitors that don’t offer refunds
• Encourage repeat business
• Prevent negative reviews & customer testimonials
• Keep yourself & team accountable

Finally, refunds can help you avoid chargebacks, which can be a nightmare. According to research, nearly 60% of cardholders first file a chargeback without contacting the merchant.

If you refuse to issue a refund, your customers may take matters into their own hands and dispute the charge with PayPal, Stripe, their credit card, or other payment processor you use. These chargebacks result in a lot of wasted time and expense.

How to Process Refunds With EDD

The process for handling refunds for digital products varies depending on which eCommerce plugin and payment processor you’re using. If you set up a store with WordPress and Easy Digital Downloads (EDD), you have full control of the costs and customer experience.

With EDD, processing a return is as simple as a few clicks.

EDD integrates with Stripe, PayPal, and many other popular payment gateways. Many of these gateways allow you to process a return within your WordPress admin.

Typically, to process a refund, go to Downloads » Orders. Then click on Edit under the order you wish to refund:

Next, select Initialize Refund under the Order items section:

This initiates the refund process. A modal window appears that looks something like this:

In this example, the order has one item—a recurring download purchased via Stripe.

If there are multiple downloads in an order, use the checkbox(es) to select which product you want to refund.

Checking the Refund Charge in Stripe box causes EDD to refund the monetary transaction directly in the payment gateway.

Once you click the Submit Refund button the items are refunded, any subscriptions tied to the order are canceled (if that option is selected), and a new record in the database is stored for that refund.

🔍 Learn more about processing returns with EDD

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Tips for Handling Refunds for Digital Products

When it comes to handling and processing refunds for digital products, there are some tips and best practices that can make it go significantly smoother.

1. Write a Clear Refund Policy

You want to write a refund policy that covers you and your customer. A policy that meets the needs of both your business and your customers.

Make sure your refund policy is easily identifiable on your website. Here are some best practices that we suggest and use ourselves.

First, have the refund policy easily viewable on the product or pricing page:

It’s also smart to summarize your return policy and link to the full policy on your checkout page:

Include a link to the policy on your website footer:

I also recommend placing links to the policy on your FAQ page, conditions agreement, documentation, etc.:

Be sure to clearly outline your terms. A good refund policy should include:

• Timeframe: How many hours or days notice do you require from the date of purchase?
• Non-refundable products: Are you selling any non-refundable products? Be sure this is clearly stated in your terms and on the product page.
• Consequences: Once the refund is issued, what happens next? Customers may lose access to support, downloads, your content, or future updates.
• How to request a refund: All of the above information won’t be helpful to a customer if they don’t know how to contact you. Include a link to your support form or the appropriate email address to simplify the process.

A money-back guarantee like this is a good way to build trust with customers. At Easy Digital Downloads, we offer a 14-day, no questions asked, no-risk, money-back guarantee.

2. Make Refund Quick & Easy

Think about refunds from the perspective of your customer. Making it easy to get their money back can help to soften the blow for both of you.

If requesting a refund is difficult, some customers will open a chargeback to reverse the payment. They may contact their bank, credit card provider, or the payment gateway. This will likely hurt you as chargebacks are a costly expense for your business.

When a dispute is opened with a bank, credit card, PayPal, or Stripe, you’ll be asked to gather the required data to resolve said dispute.

In most cases, there is a fee you’ll have to pay in addition to the original refund amount. You’ll have lost more than the initial refund amount and wasted countless hours working to resolve it.

Make it extremely clear in various places on your site how customers can request a refund.

3. Gather Information From Refunds

Refund requests are not all bad. Often they allow you to figure out what customers want or what they were missing. This allows you to make improvements to your product or website.

Many customers are clear as to why they’d like a refund. Set up an automated email that goes out after a refund asking for feedback.

It’s perfectly OK to ask, “Could you tell me what you didn’t like about the product you purchased?” Be careful how you do this. Customers may mistake your genuine interest as a way of getting out of the refund.

4. Be Willing to Make Exceptions

Sometimes, rarely, you can make an exception to your written policy.

Let’s say your policy clearly states that all refunds must be requested within 30 days of purchase.

Then a customer requests a refund on day 42. Your first reaction will be to deny the refund. They are well past the 30-day period.

Before you rush to any quick decisions, consider other options:

• Did the customer ask for help trying to resolve an issue with their purchase prior to requesting a refund?
• Was there a holiday or were they out of town?
• Is there a different product the customer would rather have?
• Does another product you offer fit their needs?
• Can you offer a discount or credit on a future purchase?

If you’re able to save the sale and keep those hard-earned dollars in your pocket, fantastic! But be willing to review all aspects of the situation and adjust your decision accordingly.

5. Consider the the Type of Digital Goods

When a refund is requested on the purchase of a physical product, the product is returned before the money is refunded. However, when a refund is requested for a digital product, there is no way for the customer to truly return the purchased item. The digital file likely remains in their possession.

Therefore, it’s smart to structure your business around providing extra capabilities and features when a customer completes a purchase. Extra capabilities and features will no longer be available if a refund is issued.

If you sell software – Use software licensing codes to prevent fraud, and offer support or access to updates that go away if a refund is processed.

Selling photos or graphics? – You could choose to only allow a certain amount of images to be downloaded per month.

If you sell courses or a series of eBooks – You could set them up as membership levels that can only be unlocked after prior online courses or books have been purchased.

Running a membership or online courses site? – One of your terms can be that access to content is revoked when a refund is issued. Be sure to clearly outline the terms of membership upfront so customers aren’t surprised further down the road

FAQs About Refunds for Digital Products

Let’s wrap up with some frequently asked questions.

Use EDD to Sell Digital Products

That’s it! We hope this article helped you learn how to handle refunds for your digital products. Processing refunds in a timely manner is important to succeeding in business and keeping a good reputation.

Don’t have Easy Digital Downloads yet? Grab your pass and get your online store started in no time:

We have more resources for entrepreneurs and digital creators like you. What do you want to learn about next?

• 🤩 The Astonishing Benefits of Selling Digital Products
• 💰 How to Promote Digital Products on Your Blog

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