Shopify merchants’ hidden refund policy mistakes that invite fraud and chargebacks

Shopify merchants often find themselves caught in refund policy traps that can quietly fuel fraud and chargebacks. One common misstep is having vague or hidden refund policies. Since Shopify stores come with refund policies turned off by default, neglecting to enable and clearly display them—whether in footers, on product pages, or at checkout—leaves customers in the dark. This confusion can lead to disputes, particularly for claims like “item not as described,” which account for a significant 22% of returns.

Another area that often goes overlooked is the need to customize refund rules for digital products. With instant delivery, returns are practically impossible, yet many merchants still issue refunds for buyer’s remorse instead of enforcing strict “all sales final” policies. This leniency can open the door to serial fraud attempts.

Bracketing—the practice of ordering multiple sizes to try on and returning the ones that don’t fit—also presents a fraud risk. With 42% of returns linked to apparel size issues, merchants who lack size guides or return limits may find themselves facing a higher chargeback risk.

Inconsistent handling between online and POS channels can further exacerbate exposure. While online refunds typically revert to the original payment method, POS systems sometimes issue card refunds even when policies favor store credit. Without unified rules or apps that bridge these channels, fraudsters can easily exploit these gaps.

Lastly, overly generous refunds without verification can pave the way for friendly fraud. Issuing full refunds on claims of "damaged" items without requiring photos or proof allows customers to keep the merchandise while still getting their money back.

To combat these issues, it’s crucial to prominently display clear, customized policies—like "Returns within 14 days for store credit; custom/final sale items excluded"—throughout your site. Implement strict no-return rules for digital goods. Utilize size guides and consider offering paid returns or exchange incentives to mitigate bracketing. Employ apps that unify return rules across channels and ensure all refund claims are verified carefully. Monitoring chargebacks and politely denying non-qualifying requests based on your policy can help build a strong defense record.

As we look ahead to 2026, with e-commerce returns costing between $10 and $45 each and fraud tactics on the rise, tightening your refund policy isn’t just a best practice—it’s essential for protecting your Shopify store’s bottom line.

Ready to safeguard your Shopify store from refund fraud and chargebacks? Try Safe App’s mobile-first, under-1-minute setup to monitor disputes, enforce policies, and fight back effectively—start your free trial today.