Stripe submits refunds to your customer's bank immediately, but depending on the bank processing time, it can take anywhere from 5-10 business days to show up on your customer's bank account.
In some cases, the refund may be processed as a reversal, meaning the original payment will simply disappear from the account statement and the balance will reflect as though the charge never occurred.
If your customer doesn't see the refund after ten business days, and they are still seeing the original charge on their bank statement, they should reach out to their bank for more information.
Setting expectations with your customer
Customers can act in many unexpected ways when they are waiting on a refund. The best strategy to cope with the uncertainty about timing of refunds is by proper and expedient communication. Let your customer know that you have processed the refund, send along a screenshot showing the refund, and let them know that the refund may take some time to disappear from their bank statement.
One helpful item we've found in the past when refunding our customers is to do the above, as well as linking to some documentation that can explain the process of the refund further. This gives the customer confidence that you understand your own process, as well as Stripe's process.
In addition, follow up with your customer after 10 business days to make sure that the refund was processed.
Where does the refund funds come from?
The refund will be credited from your Stripe Account Balance. If there are not enough funds to cover the entire refund, your bank account will be deducted for the difference in the amount. The bank account used to fund the refund is the same account that your payouts arrive in.
What happens to the fees when a refund is completed?
There are two types of fees collected when using the Payment for Stripe app. The first, is the negotiated rate with Stripe. In the US, this is generally 2.9% + 30c per transaction. When using the Payment for Stripe app, there is an additional 1% fee.
There are no fees to refund a charge, however the original Stripe fees are not refundable and will not be returned. However, if refunds are made via the Payment for Stripe app, the application fee will be returned (but again, the Stripe fee will not).
Unfortunately, if the charge refund is processed directly from the Stripe Dashboard, the 1% application fee cannot automatically be refunded. However, if you reach out to our Support team, we can manually process those fee refunds.
What happens if my customer doesn't see the refund after 10 business days?
Depending on when the refund was submitted, the refund may be processed as a reversal. This means that the original charge will drop off of the bank statement as if it never occurred, and thus the customer will not see an actual refund for the inverse amount of the original charge.
In the event the customer believes that the original charge still exists, and 10 business days has elapsed without a credit, the customer should reach out to their bank for additional information.
What about if the refund failed?
A refund can fail if the bank or card issuer is unable to process the refund correctly. The bank would then return the funds to your Stripe account balance. This process can take considerably more time, up to 30 days from the post date. Although very rare, you will be notified of the failed refund so you can organize another avenue for refunding your customer.