How to Choose the Right Refund Policy for Your Offers: The 3 Most Common Refund Policy Types

Here at Plainly Legal™, we’re big fans of a well-crafted refund policy. In this post, we’ll cover the three most common refund policies for online businesses (and how to choose...

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How to Choose the Right Refund Policy for Your Offers: The 3 Most Common Refund Policy Types

Here at Plainly Legal™, we’re big fans of a well-crafted refund policy. In this post, we’ll cover the three most common refund policies for online businesses (and how to choose...

Image of an iPad showing the legal guide.

FREE ONLINE Business Legal GUIDE

Get a quick crash course in the laws that affect your business and other ways you can protect yourself from legal headaches.

Here at Plainly Legal™, we’re big fans of a well-crafted refund policy. In this post, we’ll cover the three most common refund policies for online businesses (and how to choose the right one for you offer)! Choosing the right refund policy for your online business takes some consideration, so let’s dive into the specifics so you can decide which one is right for you.

What We'll Cover...

As an online business owner, your refund policy is a crucial tool. It helps protect your interests while also instilling confidence in your customers. And let’s be honest, Costco-level buyer confidence is #goals; right? 😉

So let’s take a peek at the three most common refund policy types you can choose from before you set the rules for your offer:

Option 1: The “No Refunds” Policy

Woman smiling pointing to the words "No Refunds". Topic: Refund policies for online businesses

This is the black coffee of refund policies – straightforward and no-nonsense. It’s perfect for digital downloads, live events, or personalized services. 

Once an offer is purchased, it’s theirs to keep. No take backsies.  

Choosing this approach is super appealing to most business owners because when a sale is made, it’s a done deal. You get to keep the money and move on.

However, it’s important to remember that this approach can be a double-edged sword. 

While it’s great for minimizing refunds, it might make some customers a tad nervous, especially if they’re a first-time buyer. 

Use this policy when you’re super confident about the value you’re delivering and when you know your buyers will love what they get.

Now, there is a slight wrinkle we need to address…

In the EU (and a few other places), there’s something called a “cooling off period.” 🥶

In these jurisdictions, if you don’t use some “special language” in your no refunds clause, you might end up having to honor refund requests that come within a certain short period after the purchase.

That’s why all of our Plainly Legal™ documents with refund policies include such “special language” that causes the buyer to forfeit their cooling-off period if they access the digital products during the cooling off period. In other words… once they access the material, no take backsies. 😉

Option 2: The “No Questions Asked” Refund Policy

Woman smiling pointing to a big check mark. Topic: Refund policies for online businesses

This is the universally loved, customer-friendly vanilla ice cream of policies and is great for low-priced offers. It’s NOT ideal for personalized services or premium offers. 

The only restriction you put on refunds with this kind of clause is the deadline for them to request one. 

The refund period is completely up to you. Could be one week, one month, six months, or even a year. But if they ask for a refund within the time period you set, you’ll give it to them without making them jump through any other hoops. 

This is a great choice if you’re selling lower-priced products or if you’re super confident that your offer is SO good that few people will want a refund. 

It’s all about trust and customer love. It builds immense buyer confidence and reduces purchase hesitation. It sends a clear message: “We believe in what we’re offering, and we want you to feel safe trying it out!” 

When considering how long your refund period should be, consider the product type and how it’s consumed. The answers to these could justify a longer or shorter refund period.  

Figure out how long it will take for people to make the decision about whether or not the product is really right for them. Adjust your refund period accordingly.

When it comes to online courses and similar group programs, most people opt for a refund period that would end before all of the content is accessible. That way your customer can get an idea if it’s right for them before the refund period is up without being able to consume it all. This can help prevent refund abuse. 

Ultimately, this refund policy type builds immense buyer confidence and reduces purchase hesitation but can encourage refund abuse. So keep this in mind when choosing this refund type.

Option 3: The “Show Your Work” Refund Policy

Woman with long hair and glasses smiling giving a thumbs up holding a laptop. Topic: Refund policies for online businesses

This is the DIY pizza kit of policies. It requires a bit of effort from the customer. Perfect for courses and coaching programs, it’s like saying, “Show us you’ve tried, and we’re here to support you.” 

This policy is fair, encourages genuine effort, and helps prevent refund abuse.

This is a good policy to consider if you’re super confident in the outcomes your proprietary methods can get your customers. (Beware of making claims that you can’t prove, though! More on that in another blog post…)

For this refund type, customers need to prove they’ve actually used the material you provided them before they can get a refund. It could be as simple as requiring them to show up for a certain number of calls and turning in completed worksheets… or you could go a step further and require them to show they did the work and didn’t get results. 

Either way, it’s fair to the business and it encourages genuine effort on the part of the customer, which helps prevent refund abuse.

Not today, refund sharks! 🙅

The key thing to remember for the “show your work” refund policy is to be REALLY specific about what work they have to complete to qualify for the refund. Your description should be so specific that deciding whether someone qualifies is so simple your toddler could make the decision. 

Important Things To Consider

Speaking of being specific, here are some other things to consider when crafting a solid refund policy:

 1. Always, always, always have a refund policy written in clear terms in your product and program terms and conditions!

This is non-negotiable. No refund policy = refunds for anyone who asks. 😱We’re pretty sure you don’t want to be handing out refunds Opray-style. 

2. Consider limiting the total number of refunds a person can ask for.

Yep, you can do this. 🥳

This is typically outlined in your website terms of use and keeps refund abuse at bay by limiting the total number of refund requests a customer can make… even if they’ve bought more than one thing from you.

3. You can have more than one refund policy.

You don’t have to enforce the same refund policy for all of your offers. 🙌 Choose the right refund policy for each of your offers and bake it right into the terms & conditions for the offer.

Easy peasy!

Each type of refund policy has its place, and the right one can make a world of difference in how your customers perceive and interact with your brand. 

If you’re feeling overwhelmed or would like a refund policy that you KNOW is perfect for your offer, we’ve got you covered. ALL of our product & program documents in our Legal Doc Generator include a customizable refund policy of your choice with language drafted by a lawyer. Click here to learn more!

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