Chargeback vs refund in Australia: what is the difference

A customer wants their money back, and you can answer in one of two ways: you refund them, or their bank takes it from you and bills you a fee on top. The first is cheaper almost every time, which is why the chargeback vs refund question deserves a straight answer.

Chargeback vs refund in Australia comes down to who controls the outcome. A refund is your decision and returns the money without a dispute fee. A chargeback is the cardholder's bank reversing the payment, so the bank decides, Shopify takes the money and a fee straight away, and your only option is to fight it with evidence.

This guide on chargeback vs refund in Australia is for you if:

A customer has asked for a refund and you are wondering whether saying no will lead to a chargeback.
You have just received a dispute and want to know whether a refund is still possible.
You want to work out, in dollars, whether refunding or fighting is the better call on your orders.

Last updated: 10 October 2026. Written by the ChargeFix team. Reviewed against sources on 10 October 2026.

The 30-second answer (TL;DR)

In a chargeback vs refund choice, a refund is yours to give and a chargeback is the bank's to decide. That single difference drives everything else.

A refund returns the sale amount. A lost chargeback returns it too, plus a dispute fee reported at A$25 for Australian stores, and it takes the decision out of your hands.

A refund before the customer disputes is not a dispute, so it does not enter your chargeback rate. A win does not remove a dispute from the rate.

For an inquiry, a full refund ends it and prevents a later chargeback. A partial refund does not. An open chargeback cannot be refunded at all.

Under Australian Consumer Law, a major problem entitles the customer to a full refund, so refunding early is often the legally correct move as well as the cheaper one.

Change of mind is different: the ACCC says there is no entitlement unless your own policy offers it, and then you must follow the policy.

Quick note: Many sellers assume a refund and a chargeback cost the same because the same money goes back to the customer. They do not: a refund costs you the sale and any card fees Shopify keeps, while a lost chargeback adds a dispute fee, counts against your chargeback rate, and removes your say in the outcome.

Chargeback vs refund at a glance

Question	Refund	Chargeback
Who starts it?	You, or you agree to the customer's request	The cardholder, through their bank
Who decides?	You	The issuing bank
What comes out of your money?	The sale amount	The sale amount plus a dispute fee, taken from your next payout
Can you argue the case?	Not needed	Yes, with evidence, usually within 7 to 21 days
Does it count toward your chargeback rate?	No, if issued before a dispute	Yes, even when you win
Can you change your mind?	Not once issued	Not once you submit, and the bank has up to 75 days

What is the difference in a chargeback vs refund in Australia?

In a chargeback or refund situation, a refund is money you send back because you decide the customer is owed it. A chargeback is a payment reversal started by the cardholder's bank, which pulls the money back through the card scheme without asking you first. The chargeback vs refund difference is control: in one you choose, in the other the bank does.

Everything else follows from that. A refund happens inside your Shopify admin, on your timetable, and ends the matter. A chargeback arrives as a notice, takes the amount from your next payout, starts a clock, and ends only when the bank rules or the customer's bank withdraws the claim.

Shopify describes a chargeback as the bank taking the disputed amount from you immediately, with a chargeback fee on top. It describes an inquiry as an earlier warning stage where nothing is taken at first. Our guide to how chargebacks work in Australia goes through the whole sequence, and the post on chargeback vs inquiry on Shopify Payments explains the early warning stage in detail.

Are refunds and chargebacks the same thing to the customer?

To a customer, they feel similar, because money returns to their card. To you, they are very different transactions. In a refund the customer gets money back and you keep control of the paperwork. In a chargeback the customer's bank decides who was right, using the evidence it sees.

AFCA, the Australian Financial Complaints Authority, says cardholders should contact the merchant first and ask for a refund or a reasonable alternative, and that their bank may ask how they tried to resolve the issue. So a customer who goes straight to their bank is often skipping a step you would have been glad to handle.

Who decides, and how fast does each one move?

With a refund, you decide and it moves as fast as you act. With a chargeback, the bank decides, and the process runs over weeks. On Shopify you usually get 7 to 21 days to respond, and the bank can take up to 75 days after you submit before it reaches a decision.

Here is the same complaint travelling down both paths of the refund vs chargeback choice. The dates are an illustration: the customer asks for money back on Monday 12 October 2026.

Step	Path 1: you refund	Path 2: the customer disputes
Monday 12 October 2026	Customer asks for a refund, you approve it the same day	Customer disputes with their bank, you are notified
Between Monday 19 October and Monday 2 November 2026	Nothing left to do	Your response is due, 7 to 21 days after the notice
Friday 30 October 2026	The matter is closed	You submit your evidence, if you chose to fight
By Wednesday 13 January 2027	Nothing	The latest the bank would normally decide, 75 days after submission

Shopify says refunds take time to appear in the customer's account, so the customer will not see money instantly, and it does not give a fixed number of days on the page we opened. That delay is the reason to tell the customer clearly what you have done and when. The reassurance is far cheaper than the dispute it can prevent.

On the chargeback path, the money is not waiting for the result. It leaves your balance when the dispute opens, and a win returns it later in a payout. Shopify also says payouts are not processed on weekends or public holidays, so a returned amount can take a little longer to appear if a holiday sits in the way.

What does a chargeback vs refund cost you in Australia?

A refund costs you the sale amount and any processing fees Shopify does not return. A chargeback costs you the sale amount plus the dispute fee if you lose, and it costs you the evidence time either way. The fee is the difference. Everything else on the page is the same money.

Shopify's international fees page says a refund does not return currency conversion or card fees. For a domestic Australian sale on the Basic plan, Shopify's Australian pricing page, which we checked on 10 October 2026, lists the online standard card rate at 1.7% plus 30 cents. Other plans have lower rates, so check yours.

Cost line	Refund	Lost chargeback	Won chargeback
The sale amount	Returned to the customer	Taken by the bank	Returned to you
Processing fee Shopify charged on the sale	Not returned, per Shopify's fees pages	Assumed not returned in this guide	Assumed not returned in this guide
Dispute fee	None	Charged, reported as A$25	Returned or not, depending on country
Your time	A few minutes	Gathering and uploading evidence	Gathering and uploading evidence
Control over the result	You	The bank	The bank

A note on that A$25. Shopify's Australian pricing page lists payment rates but no dispute fee, and no Shopify Help page we opened has an Australia row. Third-party articles dated 2026 report A$25, and NAB separately charges its own merchants A$25, so the figures are easy to confuse. Confirm the amount with Shopify Support before you budget around it.

Illustration: the same A$150 order, four outcomes

This order was A$150. The goods cost you A$60, outbound postage was A$11, and the Basic plan online processing fee was A$2.85 (1.7% of A$150 is A$2.55, plus 30 cents). We assume you pay A$9 for a return label in the refund case. The fee is A$25, the reported figure.

Outcome	Money in	Money out	Net result
A. Refund, item returned and resaleable	A$150	A$150 refund, A$2.85 processing, A$11 outbound postage, A$9 return postage	minus A$22.85
B. Refund, item not returned	A$150	A$150 refund, A$2.85 processing, A$11 postage, A$60 goods	minus A$73.85
C. Chargeback lost	A$150	A$150 taken, A$25 fee, A$2.85 processing, A$11 postage, A$60 goods	minus A$98.85
D. Chargeback won, fee returned	A$150	A$2.85 processing, A$11 postage, A$60 goods	plus A$76.15

In the refund vs chargeback comparison, look at B and C. In both you lose the sale and the goods. The only difference is the A$25 fee, which is why a refund is cheaper whenever you were going to lose anyway. If the fee is not returned on a win, outcome D falls by A$25 to plus A$51.15.

Outcome A also shows the best case for refunding: when the item comes back, you lose only A$22.85. A chargeback never gives you that route, because the money moves before the goods do.

Illustration: when the order is small

For a small order, take A$38, with A$14 of goods and A$8.50 of postage, so A$22.50 already spent. The Basic plan processing fee is A$0.95 (1.7% of A$38 is 65 cents, plus 30 cents).

Outcome	Net result
Refund, item not returned	minus A$23.45 (A$22.50 plus A$0.95)
Chargeback lost	minus A$48.45 (A$22.50, A$0.95 and A$25 fee)
Chargeback won, fee returned	plus A$14.55 (A$38 minus A$22.50 minus A$0.95)

In this chargeback vs refund example, the A$25 fee is about two thirds of the A$38 order. On a small order, a lost chargeback costs more than twice a refund, and a win only gets you A$14.55. That arithmetic is why our post on accepting or fighting a Shopify dispute tells low-value sellers to refund early.

How does a refund vs chargeback affect your chargeback rate and account?

A refund issued before the customer disputes does not create a dispute, so it stays out of your chargeback rate. A chargeback does count, and Shopify says winning does not remove it. That is the account-level reason the chargeback vs refund choice matters beyond one order: disputes build a record, refunds do not.

Shopify's monitoring page says the rate counts all customer-opened disputes. It also says a high rate can lead to a notification, a reserve on your payouts and enrolment in a card-network monitoring programme. The page gives no numeric thresholds, so we will not quote one. You can see your own rate under Settings, then Payments, or under Analytics, then Reports.

Our guide to chargeback rate and account health warnings in Australia covers the monitoring side in full. For this post, the point is narrower. Each time you could have refunded and chose to wait, you took a small bet with your account health as the stake.

Does a refund hurt your store, compared with a chargeback?

A refund does carry a cost: you lose the sale, and Shopify's fees pages say card fees are not returned on a refund. But a refund does not put a mark on your payment account. Many refunds are normal trading. Shopify's reserve page lists a higher refund rate among the things that can lead to a reserve, so a sharp, unexplained rise is worth watching, but ordinary refunds are not a warning sign.

Refund vs chargeback effect	Refund	Lost chargeback	Won chargeback
Counts in your chargeback rate	No, if issued before a dispute	Yes	Yes
Can contribute to a reserve	Only through an unusually high refund rate	Yes, through a high chargeback rate	Yes, through a high chargeback rate
Leaves a paper trail you control	Yes, your own message	Only what you upload	Only what you upload
Affects the customer relationship	Often improves it	Usually ends it	Usually ends it

In the refund vs chargeback balance, why does a won chargeback still hurt?

Because the rate counts disputes opened, not disputes lost. You can win eight of ten and still carry ten against your rate. Winning protects the cash on that order. It does not protect the account, and it does not return your time. This is the quiet advantage in a refund vs chargeback comparison: the refund closes the matter before the count starts.

In a chargeback or refund decision, when should you refund?

In a refund or chargeback choice, refund when the customer is likely entitled to one, when the order is small enough that a lost dispute would cost more than the order, or when you would not be able to prove your side. Wait and fight only when your evidence is strong and the claim looks wrong. The chargeback or refund decision should follow the facts, not your irritation.

Under Australian Consumer Law, the ACCC says a major problem entitles the customer to choose a refund of the full amount, in the original form of payment. For a minor problem the seller may choose between repair, replacement and refund. The ACCC also says a "no refunds" sign cannot take those rights away, which our post on "no refunds" notices in Australia explains. Our guide to major vs minor failures shows how to sort one from the other.

Change of mind is different. The ACCC says customers have no automatic right to a refund when they simply change their mind, unless your own policy offers one. If it does, you must follow it. The post on change of mind refunds goes through how to write that policy so it protects you.

Situation	Where you stand	Suggested move
Item arrived faulty in a way that is a major problem	The customer can choose a full refund	Refund, and ask for the item back only if it is reasonable
Item has a minor fault	You can choose repair, replace or refund	Offer the cheapest fix the customer will accept; refund if that fails
Customer changed their mind, no policy offers a refund	No entitlement	Decline politely and explain, or offer store credit as goodwill
Customer changed their mind, your policy allows it within 14 days	You must follow your policy	Refund under the policy terms
Parcel still in transit	The goods have not failed yet	Send a tracking update first; refund or reship if it is clearly lost
Parcel lost in transit	The goods never arrived	Refund or reship; see the lost-parcel post
Tracking shows delivery with a photo, customer insists not received	You may have a strong case	Ask a few questions first, then decide; see the next sections
Order under about A$50 and the story is unclear	A lost dispute may cost more than the order	Refund, and treat it as the cost of doing business

On the lost-parcel row, see our post on who is liable when a parcel is lost in transit in Australia. On the delivered-but-disputed row, read what to do when tracking says delivered before you decide.

The "about A$50" line is a rule of thumb, not a legal figure. It comes from the arithmetic in the earlier illustration: once a possible A$25 fee is added to the goods and postage you have already spent, small orders rarely survive a loss.

What if the customer is wrong?

Sometimes they are. A customer may say an item never arrived when the carrier has a signed record, or may ask for a refund outside your policy. Do not call them a fraudster, and do not assume bad faith. The customer may have misread a tracking page, or a family member took the parcel. Ask a calm question, give them the facts, and offer a route. If they dispute anyway, you have a clean record to submit.

Refund or chargeback: what if the customer already opened an inquiry?

If the customer opened an inquiry, a full refund ends it and prevents a later chargeback. A partial refund does not end it. If the customer opened a chargeback, you cannot refund it, because the bank has already taken the money. Your options then are to fight with evidence or accept the loss.

Those rules come from Shopify's pages on resolving a chargeback or inquiry. They are worth reading twice, because the cost of getting them wrong is a double loss. If you refund an order while a chargeback is open, Shopify does not allow it, and sending the money yourself by another route risks paying twice.

Chargeback or refund stage	Can you refund through Shopify?	What happens if you do
No dispute yet	Yes	The matter ends, nothing enters your rate
Inquiry open, nothing taken yet	Yes, and a full refund ends it	The inquiry closes, no chargeback follows
Inquiry open, partial refund	Yes, but it does not end the inquiry	The inquiry stays open, and the bank can still escalate
Chargeback open	No	You must respond or accept; refunding separately risks paying twice
Chargeback won	Not needed	The amount returns in a payout
Chargeback lost	Not through Shopify	The customer has already been paid by their bank

You can read the same stages in more detail in our post on chargeback vs inquiry on Shopify Payments.

How do you make a customer withdraw a chargeback?

If a chargeback is open and you want to settle with the customer, you cannot send them their money again. What you can do is resolve the problem with them and ask them to contact their bank and withdraw the dispute. Shopify says a withdrawal letter from the bank is needed, and that it can take 30 to 90 days or more to process. During that time, keep your response ready, because the due date does not move.

Do not offer the customer extra money to withdraw. In a refund vs chargeback standoff, the clean fix is solving the complaint, not paying twice. A simple message that fixes their complaint and explains the steps is enough. We cover this in the post on refunding a customer who opened a dispute, and the sequel on refunded but the customer still disputes.

How do you refund well and keep the chargeback vs refund balance in your favour?

Refund quickly, in the original form of payment, in the amount you agreed, and tell the customer exactly what you did and when to expect it. A refund that arrives without a message often prompts a second contact, and sometimes a dispute. A clear note costs thirty seconds and tends to close the matter.

Shopify says refunds take time to appear and that the customer's bank controls how fast. So the message matters as much as the money. Say the amount, the date you issued it, that the customer's bank may take several business days to show it, and that you are happy to help if it has not appeared by then.

Because a refund vs chargeback dispute often starts with silence, here is a refund message you can paste and adjust.

Subject: Your refund for order [ORDER NUMBER]

Hi [FIRST NAME],

Thanks for letting us know about [ISSUE IN ONE LINE]. I'm sorry
it did not go the way it should have.

I have refunded [AMOUNT, e.g. A$85.00] to your original payment
method today, [DATE]. Your bank controls how fast it appears,
and it can take several business days to show on your statement.

[IF ITEM IS BEING RETURNED: Please send the item back using the
label attached. You do not need to wait for it to arrive before
the refund shows.]

If you do not see the refund by [DATE + 7 DAYS], reply to this
email with your order number and I will check it straight away.
Please contact us before your bank so we can sort it quickly.

Kind regards,
[NAME]
[STORE NAME]

The last paragraph is deliberate. It tells the customer, without any pressure, that talking to you is quicker than raising a dispute. AFCA says cardholders should contact the merchant first, so you are asking for what the dispute process already expects.

Next, a checklist to run each time you refund.

REFUND CHECKLIST (run through it every time)

[ ] Confirm the order number, the customer name and the amount.
[ ] Check there is no open inquiry or chargeback on the order.
    If there is, stop and read the dispute options first.
[ ] Decide: full or partial. A partial refund does not end an
    inquiry.
[ ] Issue the refund to the original payment method.
[ ] Note any restocking or return label sent.
[ ] Send the refund message with the amount and date.
[ ] Save the message and the refund confirmation to the order
    notes.
[ ] Set a reminder for 7 days later to check the customer is
    satisfied.
[ ] If the order had GST, record the adjustment for your next
    activity statement (see your accountant).

The record-keeping steps are not optional extras. If the customer later disputes anyway, your message and the refund confirmation are the evidence. We cover that in refunded but the customer still disputes.

Should you refund before the customer asks the bank?

If you already know the customer is owed a refund, yes. Most sellers think of refunding as giving in, but in the chargeback vs refund contest it is the cheaper side. In practice, a fast refund is the cheapest thing you can do when the claim is correct. The sale is gone either way, and a lost chargeback adds a fee and a mark on your record. A chargeback vs refund choice made early costs less than the same choice made late, and a refund or chargeback decision left to the bank costs the most.

What's different for Australian merchants?

Australian merchants work under Australian Consumer Law, ATO rules on GST, bank complaint rules overseen by AFCA, and card schemes with their own time limits. The chargeback vs refund choice therefore has a legal edge here that it lacks in many other countries: the customer may be entitled to a refund whether or not they ever dispute.

The practical points for a chargeback vs refund decision here are these.

ACCC rights apply to you. A major problem entitles the customer to a full refund. Your terms cannot remove that right, and you cannot send the customer to the manufacturer instead of dealing with them yourself.
Time limits run from the customer's side. Consumer Affairs Victoria's chargeback page says customers have roughly 45 to 120 days, depending on the provider, and that the page was last updated in 2023. NAB's merchant page lists longer limits for some schemes. AFCA says the clock can run from the date the customer expected the goods. A refund request made today can still become a dispute months later, so keep your records.
GST has an adjustment step. The ATO says a refund for returned goods is an adjustment event, that you must reimburse the customer before you report it, and that you report it in the current period. The ATO page we opened does not cover chargebacks, so how GST is treated on a lost dispute is something to check with your accountant. We have not found an ATO source that settles it.
The A$25 fee is unconfirmed. Shopify's Australian pricing page lists card rates but no dispute fee. Third-party sources report A$25 and NAB charges its own merchants A$25, so check with Shopify Support before using it in a budget.
Other payment methods have their own systems. If the customer paid with Afterpay or PayPal, the refund and dispute rules follow those providers, not the card rules above. Our posts on Afterpay and Zip disputes and PayPal disputes on a Shopify store cover each.
Holidays slow the money. Shopify says payouts are not processed on weekends or public holidays. A refund goes out at once, but a returned chargeback may take longer to appear.

For the full sequence, see how chargebacks work in Australia and the time limits post at chargeback time limits in Australia.

What mistakes make the chargeback vs refund choice in Australia worse?

The most common mistake is treating a refund as a loss and a dispute as free. A dispute is never free, because even a win costs time and counts toward your rate. The other mistakes are about timing and tone: waiting too long, refunding the wrong way, or refusing without explaining.

Waiting for the customer to give up. An unanswered refund request is the most common path to a dispute. A reply inside one business day removes most of the reason to call the bank.
Offering only store credit when the customer is entitled to a refund. For a major problem, the ACCC says the customer can choose the full refund in the original form of payment.
Refunding part of an inquiry. A partial refund does not end an inquiry. If you mean to settle it, refund in full or leave the inquiry open and respond.
Trying to refund an open chargeback. Shopify does not allow it, and paying separately risks a double loss.
Fighting every dispute on principle. On small orders the fee alone can exceed the margin. Pick your fights using the numbers.
Refunding without a message. The customer sees nothing, assumes you ignored them, and calls their bank anyway.
Telling the customer to contact the manufacturer. The ACCC says sellers cannot do this when the problem is covered by consumer guarantees.
Discarding records after a refund. A customer can still dispute months later. Keep the message, the confirmation and the order notes.

Most of these come down to the same habit: act early and write it down. In every refund vs chargeback case we describe, the early, documented option wins. A refund decision made in the first day, with a clear message, protects your rate, your cash and your reputation better than the best dispute response you could write in week three.

Frequently asked questions

Is a chargeback vs refund choice really that lopsided?

In a chargeback vs refund comparison, a chargeback is usually worse. A refund returns the sale amount. A lost chargeback returns it too, adds a dispute fee, counts against your chargeback rate and takes the decision out of your hands. The exception is a strong case: if your evidence is clear, fighting may recover the whole amount.

Can I refund a customer after a chargeback is filed?

Not through Shopify once a chargeback is open, because the bank has already taken the money. For an inquiry you can refund in full and that ends it. If you want to settle with the customer, resolve their problem and ask them to ask their bank to withdraw the dispute.

Does a refund stop a chargeback, or can a chargeback or refund both happen?

A full refund on an inquiry ends it and prevents a later chargeback. A partial refund does not. If you refund before any dispute exists, there is usually nothing left to dispute, though a customer can still contact their bank if they are unhappy or did not notice the refund.

Is there a fee when I refund?

Shopify has no dispute fee on a refund, but its fees pages say card processing fees are not returned when you refund. So a refund costs you the sale and the original processing fee. That is still less than a lost chargeback, which adds a dispute fee on top. Confirm your plan's rates in your admin.

How long does a refund take compared with a chargeback?

You can issue a refund the same day, though the customer's bank controls when it shows in their account. A chargeback runs much longer: a response due in 7 to 21 days, then up to 75 days for the bank to decide. The refund is faster for both of you.

Can a customer get a refund and a chargeback on the same order?

They should not, because the second would pay them twice. If a refund and chargeback both appear on one order, or a customer disputes after you have refunded, show the bank the refund confirmation, the date and your message. Clear records give the bank something concrete to weigh, which is why saving them matters.

Do refunds count toward my chargeback rate?

Not when you refund before a dispute is opened. Shopify's monitoring page says the rate counts customer-opened disputes. A refund you issue first is not a dispute, so it stays out. A high refund rate can still draw attention, so keep reasons on file for any unusual rise.

Do I have to give a refund under Australian Consumer Law?

If the problem is a major one, the ACCC says the customer can choose a refund of the full amount. For a minor problem you can choose to repair, replace or refund. For a change of mind, there is no entitlement unless your own policy offers one. A "no refunds" sign does not remove these rights.

In a refund vs chargeback choice, should I refund first or fight?

Refund when the customer is probably entitled to it, when the order is small, or when you lack proof. Fight when your evidence is strong and the claim looks wrong. If an inquiry is still open, a full refund ends it. If a chargeback is open, you can only respond or accept it.

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Chargeback vs refund in Australia: what is the difference

What is the difference in a chargeback vs refund in Australia?

Are refunds and chargebacks the same thing to the customer?

Who decides, and how fast does each one move?

What does a chargeback vs refund cost you in Australia?