Refunding a COD order: what Shopify can and can't do

Shopify can't send money back to a shopper who paid cash on delivery. The courier collected that cash, not Shopify, so there is no payment for Shopify to reverse. You pay the shopper back yourself, for example by bank transfer or in cash, and then record the refund on the order in Shopify so your reports stay correct. If the shopper agrees, Shopify store credit or a gift card can replace a cash refund.

Does a refused COD order need a refund?

No. A shopper who refused the parcel paid nothing, so there is nothing to give back. Cancel the order and put the items back in stock. Shopify's refund help page says that if there is no payment to refund, you can restock the items. For how to record a refusal so you can find it later, see fulfilling COD orders.

A COD refund only comes up after the shopper has paid the courier: they return an item, something arrived damaged or missing, or you agree to a partial refund.

Why can't Shopify refund a COD payment?

COD is a manual payment method: the payment happens outside Shopify's online checkout. When you mark a COD order as paid, Shopify records that you received the money. No money moved through Shopify, so a refund has nowhere to go.

Shopify's refund help page says some payment methods can't be refunded to the original payment method. Its troubleshooting page covers refunds you make outside Shopify, such as a bank transfer:

• Shopify doesn't record them automatically.
• The order can keep a paid status until you record the refund yourself.
• If a refund can't go back to the original payment method, you can settle with the customer by issuing store credit, creating a gift card, or arranging another manual payment.

How do you refund a COD order, step by step?

1. Check the order is marked paid. If the courier hasn't paid you for it yet, the order is still Pending and there is no payment on it to refund. Mark it paid when the money arrives (see how to mark COD orders as paid).
2. Agree how you'll pay the shopper back: bank transfer, cash, store credit or a gift card.
3. Create a return first if items are coming back. Shopify says you can't create a return after a refund has been issued. The steps are in the next section.
4. Send the money. Keep the transfer reference or a receipt.
5. Record the refund in Shopify. Shopify's troubleshooting page gives these steps:
   1. From your Shopify admin, go to Orders and open the order.
   2. Click Refund.
   3. Enter the amount you refunded outside Shopify.
   4. In the refund reason, note that the refund was processed outside Shopify, for example "Bank transfer on 26 Oct, ref 4471".
   5. If the option is shown, deselect processing the payment refund, so Shopify records the refund without trying to process it again.
   6. Click Refund.
6. Decide on the email. Shopify sends the customer a refund notification unless you deselect Send a notification to the customer. The refund reason is a note for your staff; Shopify doesn't show it to the customer.

Shopify also suggests recording any refund you settled outside Shopify in the order timeline, for your own records.

How do returns work for a COD order?

Create the return in Shopify before you refund. On the order page, click Return (or More actions > Return if the order still has unfulfilled items), enter the quantity, choose a Return reason, pick a return shipping option and click Create return.

Two Shopify rules matter for COD stores:

• You can only create a return for fulfilled items that haven't been refunded. That is one more reason to fulfill every COD order when it ships.
• Shopify's own return labels are only available when you have a location in the same country as the shopper's address and that country is the United States or Canada. GCC stores choose Upload a return label, where you can enter your courier's tracking number, or No shipping required.

When the items arrive, you process the return. Shopify lets you issue the refund straight away or later. For a COD order, refund later if you haven't paid the shopper yet, then record the refund once the money has gone out.

Can you refund a COD order with store credit or a gift card?

Yes, if the shopper agrees. A shopper who paid in cash may expect cash back, so offer these as a choice. Write the options into your refund policy too; see the COD policy page template.

Store credit is a balance on the customer's account that they can spend at your checkout. On the refund screen you can refund to store credit instead of the original payment method, or to both. Shopify's store credit page lists some limits:

• The shopper must sign in with customer accounts or Shop Pay to spend it online. Store credit isn't available for legacy customer accounts. It is on by default; the Store credit switch is in your Customer accounts settings.
• Staff need the Refund to store credit permission.
• Shoppers can't choose to spend only part of their balance on an order.
• Shoppers only see the balance that matches the currency of their checkout.
• You can set an expiry date. Shopify suggests checking your local laws first.

A gift card gives the shopper a code to spend in your store. Shopify says you can create a gift card in your admin for any eligible value without receiving a payment, up to USD 2,000 or the equivalent in the gift card's currency (Shopify Support can change that limit). Gift cards are available on every Shopify plan, and your issued cards are listed under Products > Gift cards. After you send the code, record the refund on the order as a refund made outside Shopify, with a note such as "Gift card issued".

What does each refund method involve?