Refunding a customer who opened a dispute on Shopify: what works at each stage

A customer has opened a dispute, and part of you wants to just refund them and be done. Whether you can refund the customer depends on one thing: whether the dispute is an inquiry or a chargeback. Get that wrong and you can pay twice.

Refunding a customer who opened a dispute works differently by stage. On an inquiry, a full refund ends it. On a chargeback, Shopify says you cannot refund until the customer's bank drops the chargeback, so you respond with evidence or accept the loss, and the customer must withdraw through their bank.

This guide to refunding a customer who opened a dispute is for you if:

• You have a dispute notice and want to refund, but are not sure the refund will work.
• You have already refunded and want to know what the bank will see.
• You need the exact steps and wording for the customer, the bank letter and your Shopify response.

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

The 30-second answer (TL;DR)

• Check the stage first. On an inquiry, the bank has not taken funds. On a chargeback, it has taken the amount and holds it.
• Shopify's resolution page says a full refund during an inquiry means the cardholder cannot start a chargeback. A partial refund can still be followed by a full chargeback. Submit evidence of the refund too.
• Shopify says you cannot issue a refund while a chargeback is open. The cardholder must first drop the chargeback, then you can refund.
• If the customer agrees to withdraw, they need an official letter from their bank on letterhead, with the case number, confirming the chargeback is cancelled. A screenshot is not enough. It can take 30 to 90 days or sooner.
• Do not assume the chargeback is over because the customer says they cancelled it. Keep your evidence deadline.
• Accepting a chargeback returns the amount to the customer and you are not refunded the fee. Winning returns the amount plus the fee, per Shopify's resolution page.

Quick note: Refunding feels like the fastest way to end a dispute, and in some stages it is. In others it does nothing, or it creates a second loss. The rules for refunding a customer in this guide come from Shopify's pages on resolving a chargeback or inquiry, opened on 10 October 2026, plus Australian sources for the surrounding context.

Refunding a customer who opened a dispute at a glance

Stage	Can you refund through Shopify?	What it does
Inquiry open	Yes	A full refund means the cardholder cannot start a chargeback
Inquiry, partial refund	Yes	A full chargeback can still occur
Chargeback open	No	Funds are held by the bank; the cardholder must drop it first
Chargeback withdrawn	Yes, after the bank confirms	You then provide the refund
Chargeback decided	Not through Shopify	The bank's decision is final

Can you refund a customer who has opened a dispute?

It depends on the stage. During an inquiry you can refund, and a full refund stops a chargeback. Once a chargeback opens, Shopify says you cannot issue a refund, because the bank has withdrawn the funds and holds them pending the outcome. Refunding a customer who opened a dispute is possible only at the inquiry stage.

The two stages look similar in your admin but behave differently. Shopify's overview says that when the cardholder's bank makes an inquiry, it does not take the disputed amount or a fee right away. With a chargeback, the bank takes the amount right away and also takes a fee. Our post on chargeback vs inquiry on Shopify Payments explains how to tell which you have, and how chargebacks work in Australia gives the full sequence.

How do you tell an inquiry from a chargeback?

Look at your dispute in the Shopify admin and at your balance. An inquiry has not removed money. A chargeback has. If you are unsure, read the dispute details and the payout lines, which our post on a Shopify payout held because of a chargeback shows how to do. Do not guess, because the correct action is different for each.

Check	Inquiry	Chargeback
Money taken by the bank	No	Yes, immediately
Fee taken	No	Yes
Can you refund	Yes	No
Evidence due	Yes, 7 to 21 days usually	Yes, 7 to 21 days usually
Bank decision	About 65 to 75 days after you submit, per Shopify	Up to 75 days after you submit

Why does the stage matter so much when refunding a customer?

Because refunding a customer at the wrong stage does nothing, or costs you twice. If you try to refund the customer outside Shopify while a chargeback is open, and the bank later rules for the customer, they have been paid twice. Shopify's page warns that you should not assume the chargeback is resolved just because the customer says they have cancelled it.

What should you do when refunding a customer who opened a dispute at the inquiry stage?

When refunding a customer at the inquiry stage, issue a full refund promptly, tell the customer, and submit evidence that proves you refunded. Shopify says a full refund during an inquiry means the cardholder cannot initiate a chargeback, and that you should also submit evidence of the refund. Do not make a partial refund unless you are prepared for a full chargeback to follow. Refunding a customer in full is the clean option.

Shopify's reasoning is that no funds are taken by the card company during an inquiry. So a full refund puts the money back with the customer, and nothing is left to dispute. A partial refund leaves part of the order open, so a full chargeback can still occur. In that case the customer is refunded part by you and the full amount by their bank, which is a double payment.

Illustration: the cost of a partial refund on an inquiry

An A$175 order costs you A$70 in goods and A$12 in postage. Processing at 1.7% plus 30 cents, per Shopify's Australian pricing page checked on 10 October 2026, is A$3.28 (1.7% of A$175 is A$2.98, plus 30 cents). The item is not returned. The fee used is the reported A$25, which we could not find on Shopify's Australian pages.

Path	What happens	Net result
Full refund during the inquiry	Customer repaid in full; no chargeback possible	minus A$85.28 (A$70, A$12 and A$3.28)
Partial refund of A$50, then a full chargeback is lost	Customer gets A$50 from you and A$175 from their bank	minus A$160.28
Partial refund of A$50, then you win	Customer keeps A$50, you keep the rest	plus A$39.72 (A$175 less A$50, A$70, A$12 and A$3.28, fee returned)

Refunding a customer in part is a gamble. It gives you plus A$39.72 if you win and minus A$160.28 if you lose, a swing of A$200.00. The full refund is a certain minus A$85.28. If the case is weak, refunding the customer in full is the safer choice. If your evidence is strong, you might fight an inquiry without refunding at all. Our guide to accepting or fighting a Shopify dispute shows how to decide.

What message should you send when refunding a customer?

Tell the customer the amount, the date and that their bank may take several business days to show it. Shopify's other pages say refunds take time to appear in a customer's account. Use this template.

TEMPLATE: REFUND DURING AN INQUIRY

Subject: Your refund for order [NUMBER]

Hi [FIRST NAME],

I'm sorry about [PROBLEM IN ONE LINE]. I have refunded the full
amount, A$[AMOUNT], to your original payment method today,
[DATE].

Your bank controls how fast it appears, and it can take several
business days. If you don't see it by [DATE + 7 DAYS], reply to
this email and I will check it straight away.

Because your bank asked us about this payment, I'll also send them
a record that you have been refunded in full. You don't need to do
anything.

Kind regards,
[NAME]

Then submit the refund confirmation and this email as evidence on the dispute. Shopify says to submit evidence that proves you refunded the customer. Our post on chargeback response templates has a template for exactly this case.

What should you do about refunding a customer who opened a dispute that is now a chargeback?

You cannot refund the customer through Shopify. Shopify says refunds cannot be issued while a chargeback is open, because the bank has already withdrawn the funds and holds them pending the outcome. Your options are to fight with evidence, accept the loss, or resolve the problem with the customer and ask them to withdraw through their bank.

Shopify's resolution page says the cardholder must first drop the chargeback, and then you can provide a refund. It says you can talk to the customer by phone or email to try to resolve the issue. If they are satisfied, they must contact their bank and ask them to cancel the chargeback. When you cannot refund the customer yet, Shopify also says you should still submit evidence showing the customer has withdrawn their claim, and that you should reassure them you need to wait for official resolution before you can refund.

Option	What happens	Fee	Rate
Fight	Submit evidence; the bank decides within 75 days of submission	Returned on a win, per Shopify's resolution page	Counts toward your dispute rate
Accept	The amount goes to the customer	Not returned	Counts toward your dispute rate
Settle and withdraw	The customer asks their bank to cancel; you then refund	Not confirmed	Counts, because it was a dispute

The fee treatment on a withdrawal is not stated on the page we opened, so confirm it with Shopify Support. Winning does not remove a dispute from your dispute rate, according to Shopify's resolution page, and neither does a withdrawal. Our post on chargeback rate and account health warnings in Australia covers why that matters.

Illustration: settling a chargeback on an A$240 order

An A$240 order costs you A$95 in goods and A$14 in postage, with A$4.38 in processing (1.7% of A$240 is A$4.08, plus 30 cents). A chargeback opens on Monday 2 November 2026. You believe the customer is owed a refund. You contact them on Tuesday 3 November and they agree to withdraw.

Date	Event
Monday 2 November 2026	Chargeback opens; the bank takes A$240 and the fee
Tuesday 3 November 2026	You speak to the customer; they ask their bank to cancel
Monday 9 to Monday 23 November 2026	Your response window, 7 to 21 days
Friday 20 November 2026	You submit evidence anyway, including the customer's email
Thursday 3 December 2026 to Monday 1 February 2027	When the withdrawal letter could arrive, 30 to 90 days after 3 November
Wednesday 3 February 2027	Latest bank decision if the dispute is not withdrawn, 75 days after 20 November

The money outcomes depend on the path.

Path	Calculation	Net result
Settle, withdraw, then refund; fee returned	minus A$95, A$14 and A$4.38	minus A$113.38
Settle, withdraw, then refund; fee not returned	the same, less the A$25 fee	minus A$138.38
Accept the chargeback	minus A$95, A$14, A$4.38 and the A$25 fee	minus A$138.38

If the fee comes back on a withdrawal, refunding the customer after settling saves A$25.00 over accepting. If it does not, the two paths cost the same in dollars, and settling is still better for the relationship and your reputation. Either way, submit your evidence on time, because Shopify says a customer saying they cancelled is not the same as the bank confirming it.

What if you win after promising to refund the customer?

If you win the chargeback and later refund the customer, Shopify says the full chargeback amount plus the fee is returned in your next payout after the decision. The customer's bank can also dispute the same transaction again, and winning the first chargeback does not guarantee you keep the amount. Do not promise a customer something you cannot deliver if you win and they are owed money anyway. Be clear in writing about when you will refund the customer in each case.

How does the bank withdrawal letter work?

The customer must get an official letter from their bank that is on letterhead, shows the case number and confirms the chargeback has been cancelled. Shopify says a screenshot of a bank statement is not enough. The letter can take 30 to 90 days or sooner, and Shopify cannot request early resolution for American Express or for Visa disputes with a Fraudulent reason code.

Shopify's list of requirements is specific. Give it to the customer in plain words, because they will be dealing with their bank's process, which they know better than you do. Be patient: the bank, not you, controls the time.

Requirement	Detail from Shopify
Source	An official withdrawal letter from the customer's bank
Format	On official bank letterhead
Content	Displays the case number and confirms the chargeback has been cancelled
Not enough	A screenshot of the customer's bank statement
Time	Can take up to 30 to 90 days or sooner
Exceptions	Shopify cannot request early resolution for American Express or Visa disputes with a Fraudulent reason code

Send this to the customer once you have agreed a fix.

TEMPLATE: ASKING THE CUSTOMER TO WITHDRAW

Subject: Order [NUMBER] - next steps

Hi [FIRST NAME],

Thank you for talking with me. As agreed, I will [REMEDY, e.g.
refund A$AMOUNT in full / send a replacement] once your bank
confirms the dispute is cancelled.

Here is what we need from you:
1. Contact your bank and tell them you'd like to withdraw the
   dispute for the payment of A$[AMOUNT] on [DATE] to [STORE NAME].
2. Ask for an official letter, on the bank's letterhead, that shows
   the case number and confirms the dispute is cancelled.
3. Send the letter to me at [EMAIL] (a screenshot of your
   statement isn't enough).

I know the bank can take a while, sometimes 30 to 90 days. While
the dispute is open I can't refund the payment through Shopify, so
I'll act the day the cancellation is confirmed. I'll keep you
updated, and my offer stands.

Kind regards,
[NAME]

Do not offer extra money to the customer for withdrawing, and do not suggest they say something untrue to their bank. Keep the message to what you will do and what you need.

Can you speed the letter up?

Shopify says gathering a withdrawal letter will not speed things up for American Express disputes or Visa disputes with a Fraudulent reason code. For other disputes, it says the process can take 30 to 90 days or sooner. Beyond that, the page gives no way to accelerate it. Keep your deadline in mind. The response due date does not move because a letter is on its way.

Should you refund a customer, fight or accept?

Refund a customer early if they are entitled and the dispute is an inquiry. Fight if your evidence is strong and the claim looks wrong. Accept if you have no evidence and the order is small. Settle and withdraw if the customer is entitled to something and the chargeback is already open. The decision depends on the stage, the proof and the money.

Situation	Stage	Suggested move
Customer entitled to a refund	Inquiry	Full refund, submit proof
Customer entitled to a refund	Chargeback	Settle with the customer and ask them to withdraw, or accept
Strong delivery proof, claim looks wrong	Inquiry	Respond with evidence, or refund if the order is small
Strong delivery proof, claim looks wrong	Chargeback	Fight with evidence
No evidence, small order	Either	Refund (inquiry) or accept (chargeback)
Item faulty (major problem)	Either	Treat as entitled, see the ACCC rules below

When refunding a customer is a legal question, note that under Australian Consumer Law the ACCC says a major problem entitles the customer to a full refund, normally to the original payment form, and that a "no refunds" sign cannot deny that. That means in a faulty-item dispute you may owe the refund anyway. Our post on major vs minor failures under consumer guarantees explains the test, and chargeback vs refund in Australia sets the costs side by side.

Use this checklist when a dispute arrives.

DISPUTE ARRIVES: REFUND CHECKLIST

[ ] Open the dispute: is it an inquiry or a chargeback?
[ ] Note the response due date and your store timezone
[ ] Check the balance: was money taken?
[ ] Is the customer entitled to a refund? (fault, not received)
[ ] INQUIRY, entitled: issue a FULL refund now
[ ] INQUIRY, partial offer: understand a full chargeback can follow
[ ] CHARGEBACK: do not refund through Shopify
[ ] CHARGEBACK, settling: message the customer, ask for the bank
    letter, keep the deadline
[ ] Save the refund confirmation and your messages
[ ] Submit evidence of the refund or the withdrawal
[ ] Diarise the bank decision window

How do you refund a customer in the Shopify admin during a dispute?

Open the order, choose the refund option and refund the full amount to the original payment method, then add a note linking the refund to the dispute. Shopify's resolution page does not describe the admin screens and points to its refunding orders guide, so follow that guide for the exact steps. What matters here is the timing and the record.

Because refunding a customer is only possible at the inquiry stage, check the dispute status immediately before you click. If the status has changed to a chargeback since you last looked, the refund will not work and you should stop. After you refund, do three things on the same day: save the refund confirmation, send the customer the refund message, and add the confirmation to the dispute as evidence. Our post on what to save at fulfilment covers keeping the order record tidy.

Step	Action	Why
1	Re-open the dispute and confirm it is still an inquiry	Refunding a customer is not possible after a chargeback starts
2	Refund the full order amount to the original payment method	A partial refund can leave a full chargeback open
3	Note the dispute number on the order	Links the refund to the case
4	Save the refund confirmation as a PDF or screenshot	Evidence that you refunded the customer
5	Email the customer the amount and date	Reduces calls to the bank
6	Attach the confirmation and email to the dispute response	Shopify says to submit proof of the refund
7	Diarise a check in 7 days	Confirms the customer received the refund

Should you restock or ask for the item back?

That depends on the problem and on the ACCC rules, not on the dispute. The ACCC says that for a confirmed problem the business generally reimburses reasonable return costs, and that if no problem is found the business may charge reasonable collection and inspection costs but must give an estimate first. Do not hold up a refund on an inquiry while you wait for a return, because the dispute clock is running. Refund the customer in full, then deal with the return separately.

What happens to the money and the record?

A full refund on an inquiry returns the sale amount to the customer and ends the dispute. A chargeback that you win returns the amount and, per Shopify's resolution page, the fee. A chargeback you accept costs the amount and the fee. Every customer-opened dispute counts toward your dispute rate, even those you win.

On GST, the ATO says a refund for returned goods is an adjustment event, that you must reimburse the customer before reporting it, and that you report it in the current period. The page we opened does not cover chargebacks, so how GST applies to a lost or withdrawn dispute is unconfirmed. Ask a registered tax agent. Our post on GST and BAS on refunds and lost chargebacks covers what we could and could not verify.

Result	Amount	Fee	Dispute rate
Full refund during an inquiry	Returned to customer	None	No chargeback follows
Chargeback won	Returned to you	Returned, per Shopify's resolution page	Still counts
Chargeback accepted or lost	Goes to customer	Not returned	Counts
Chargeback withdrawn by the customer	Depends on bank confirmation	Not confirmed	Counts

What's different for Australian merchants?

For Australian merchants, the rules above apply as written by Shopify, but the fee, the bank process and the consumer law context are local. Customers can approach their bank for a long time after the sale, and the Australian rules on refunds apply alongside the card process.

• The fee is unconfirmed. Shopify's Australian pricing page lists card rates and no dispute fee. Third parties report A$25, and NAB charges its own merchants A$25.
• Customers should contact you first. AFCA says so, which makes a prompt refund offer both fair and sensible.
• Bank processes vary. Withdrawal letters are the customer's dealing with their bank. AFCA says it checks whether the bank made reasonable efforts, and cannot review a scheme decision.
• Consumer guarantees run alongside. A major problem entitles the customer to a refund regardless of the dispute, so refunding a customer may be required anyway.
• Change of mind is different. The ACCC says there is no automatic refund right unless your own policy offers one.
• Long dispute windows. Consumer Affairs Victoria says 45 to 120 days, and NAB lists 210 days for eftpos. See chargeback time limits in Australia.
• Public holidays slow payouts. Shopify says no payouts are processed on weekends or public holidays, so money returned after a win may take longer.
• Other payment methods differ. Afterpay and PayPal use separate dispute systems. See Afterpay and Zip disputes and PayPal disputes.

What mistakes make refunding a customer who opened a dispute go wrong?

The biggest mistake is refunding at the wrong stage. A partial refund on an inquiry can leave a full chargeback open, and a separate payment during a chargeback can leave you paying twice. Other mistakes involve the withdrawal letter, deadlines and evidence.

1. A partial refund on an inquiry. Shopify says a full chargeback can still occur.
2. Trying to refund an open chargeback. Shopify says you cannot, and sending money another way risks paying twice.
3. Taking the customer's word that they cancelled. Shopify says not to assume the chargeback is resolved.
4. Accepting a screenshot as proof of withdrawal. The bank letter, with the case number, is what counts.
5. Missing the deadline while waiting for the letter. The due date does not move.
6. Not submitting proof of the refund. Shopify says to submit evidence that proves you refunded the customer.
7. Offering the customer money to withdraw. It looks like paying for silence.
8. Forgetting the rate. A settled dispute still counts toward your dispute rate.

Frequently asked questions

Can I refund a customer who opened a dispute?

If it is an inquiry, yes, and a full refund means the cardholder cannot start a chargeback. If it is a chargeback, no: Shopify says refunds cannot be issued while one is open. The cardholder must drop the chargeback first, and then you can refund. Check which stage you have.

Does refunding a customer stop a chargeback?

A full refund during an inquiry stops one, according to Shopify. A partial refund does not, and a full chargeback can still occur. Once a chargeback is open, you cannot refund through Shopify at all. Submit evidence of any refund you have issued so the bank can see it.

What if I refund and the bank still takes the money?

Submit proof of the refund as evidence: the refund confirmation, the date and your message to the customer. Shopify says to submit evidence that proves you refunded the customer. If the bank still rules for the customer, they could be paid twice, which is why a full refund at the inquiry stage matters.

How does a customer withdraw a chargeback?

They contact their bank and ask for the dispute to be cancelled. Shopify says they must get an official letter on bank letterhead that shows the case number and confirms cancellation, and a statement screenshot is not enough. It can take 30 to 90 days or sooner.

Can I speed up the withdrawal?

Not reliably. Shopify says the letter can take 30 to 90 days or sooner, and that it cannot request early resolution for American Express disputes or Visa disputes with a Fraudulent reason code. Keep your evidence deadline, because it does not move while you wait.

Do I get the chargeback fee back if the customer withdraws?

We could not confirm it. Shopify says a win returns the amount and the fee, and that accepting does not return the fee, but the page we opened does not say what happens on a withdrawal. Shopify's overview adds that it might refund the fee depending on country. Ask Shopify Support.

Should I accept the chargeback and refund the customer separately?

No. Shopify says you cannot refund while a chargeback is open, and sending money another way risks a double payment if the bank rules for the customer. Accepting returns the amount to the customer through the bank, and you are not refunded the fee.

Does a settled dispute count against my rate?

Yes. Shopify says a dispute resolved in your favour still counts toward your overall dispute rate, and a customer-opened dispute counts whatever the outcome. A refund before any dispute exists does not count. That is the account-level reason to refund early when the customer is entitled.

Do Australian consumer rights change what I should do?

They can. The ACCC says a major problem entitles the customer to a full refund, and "no refunds" cannot deny it. If the item is faulty in a major way, you may owe the refund whatever the dispute stage. For change of mind, there is no automatic right unless your policy offers one.

Start free trial with ChargeFix

ChargeFix helps Australian Shopify merchants turn their order, delivery, message and policy records into a ready response. You review and file it, or let Auto mode handle them. If you want your evidence ready while you work out refunding a customer who opened a dispute, you can try it on a free trial first.

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Sources

• Resolving a chargeback or inquiry, Shopify Help Center
• Chargebacks and inquiries, Shopify Help Center
• Responding to chargebacks and inquiries, Shopify Help Center
• Managing chargebacks in the Shopify admin, Shopify Help Center
• Chargeback and dispute monitoring, Shopify Help Center
• Payout timing, Shopify Help Center
• Shopify pricing, Australia
• Repair, replace, refund, cancel, ACCC
• Chargebacks factsheet, Australian Financial Complaints Authority
• Chargebacks, Consumer Affairs Victoria
• Chargebacks: prevention and dispute guide for merchants, NAB
• When to make adjustments, Australian Taxation Office