If you’re a Square user, you may have gotten an email notice about a change to their refund policy. Here’s what you need to know about upcoming changes.
What is Changing with Square’s Refund Policy?
Effective April 11, 2023, Square will no longer refund processing fees when customers issue full or partial refunds. According to Square, this change places them in line with competitors in the processing industry, including Stripe and PayPal.
What does this change mean for Square Customers?
Impact will heavily depend on the frequency of refunds, and the total average dollar amount of those refunds, that you experience.
For example, let’s say a customer places an order of $1000 online then decides to cancel that order before it is shipped. Most Square merchants will see $29.30 processing fee that will no longer be refunded (2.9% + 30 cents).
In a different scenario, say you are planning to launch a new product and take 100 pre-orders for $10 each, but your supplier falls through and you now need to refund those orders. Most Square merchants would see processing fees totaling $59 that would not be returned upon refunding their customers (2.9% + 30 cents per transaction).
Square recommends that customers review their refund history to determine the potential effects of this change. You can do so by utilizing the Sales Summary report, found by visiting your Square Dashboard.
You may also want to review your current refund policy to determine if any updates are needed. Square is quick to offer that a restocking fee or cancellation fee policy to lessen the burden for their users (small businesses like your own). We don’t think such fees are customer friendly and passing along these costs to consumers could negatively impact sales conversion; only you can determine if this course is necessary for your business.
“Current Industry Standards”
Here at Sprucely Designed, we don’t agree with this change, but want our customers to stay aware, as the impact of this could be significant.
We hate to see payment gateway processors put small businesses in a position where you have to adopt potentially anti-consumer cancellation or restocking fees or absorb those costs as business losses. Consumers have become accustomed to benefits such as full refunds on cancellations or returns that, historically, small businesses could offer without incurring large transactions fees.
In our view, this puts small businesses in (yet another) disadvantage in the ecommerce landscape; faced with increasing costs and slimming margins.