Question About Loyalty Point Deduction Rules During Refunds

Questions
1

Hi Square Team,

I’d like to better understand how points are deducted from a customer’s Loyalty Account when a refund is issued.

Our Loyalty Program uses a Spend-based rule, where the customer earns 1 point for every $10 spent (pre-tax).

For example, if a customer places an order totaling $23.35, with $21.90 as the pre-tax subtotal, they would earn 2 points.

Could you please clarify how many points would be deducted in the following refund scenarios:

  • Refund of $1
  • Refund of $5
  • Refund of $10
  • Refund of $20

In particular, I’d like to know:

  • Is the deduction based on the pre-tax portion of the refund?
  • Is the calculation prorated?
  • Are there rounding rules?

Understanding this logic is important for ensuring consistency between our internal reward tracking and Square’s behavior.

Thank you in advance for your help!

Best regards,
Murphy

2

For spend-based loyalty programs, Square handles point deductions during refunds using the following rules:

  1. Pre-tax Calculation: Yes, the points deduction is based on the pre-tax portion of the refund, maintaining consistency with how points are earned.
  2. Proration: Yes, the calculation is prorated. Points are deducted proportionally based on the refund amount relative to the original qualifying spend amount.
  3. Rounding: Square uses floor rounding when calculating point deductions, meaning partial points are rounded down to the nearest whole point. :slight_smile:

For your specific scenarios, assuming a rule of 1 point per $10 spent:

  • $1 refund: 0 points deducted (less than $10 threshold)
  • $5 refund: 0 points deducted (less than $10 threshold)
  • $10 refund: 1 point deducted (exactly one $10 increment)
  • $20 refund: 2 points deducted (two complete $10 increments)

The system maintains the same $10 increment rule used for earning points when calculating deductions. This ensures that the point balance accurately reflects the customer’s adjusted qualifying spend.

Important notes:

  • Points are only deducted if the original transaction earned points
  • The system will never deduct more points than were originally earned from the transaction
  • If a customer’s point balance would go negative from a refund, the balance is set to 0

This consistent approach ensures that your internal reward tracking will align with Square’s behavior as long as you follow these same rules.

3

Hi Bryan,

Thank you for your earlier explanation regarding point deductions for Spend-based loyalty refunds — that was very helpful.

I’d like to follow up with a question about Visit-based loyalty programs.

In our current Loyalty Program, we’ve configured a Visit Rule:
Customers earn 3 points per order if the pre-tax subtotal exceeds $10.

For example, a customer places an order with a total of $23.35, where the pre-tax amount is $21.90, and earns 3 points.

If the merchant later issues a refund of:

  • $1
  • $5
  • $10
  • $20

How many points would be deducted in each case?

I’d appreciate your clarification on how the refund logic applies under the Visit Rule — especially how partial refunds affect point deductions.

Thanks again for your support!

Best regards,
Murphy

4

For Visit-based loyalty programs, the point calculation is fundamentally different from Spend-based programs. The key distinction is that Visit-based programs award points based on qualifying visits/transactions rather than the dollar amount spent.

Your Program Configuration:

  • Rule Type: Visit-based
  • Points Awarded: 3 points per qualifying visit
  • Qualification Threshold: $10 pre-tax subtotal
  • Example Transaction: $21.90 pre-tax ($23.35 total) → 3 points earned

Refund Point Deduction Logic:

For Visit-based programs, the point deduction logic follows these rules:

  1. If the post-refund pre-tax subtotal remains above the qualification threshold ($10):

    • No points are deducted
    • The visit still qualifies

  2. If the post-refund pre-tax subtotal falls below the qualification threshold:

    • All points (3 points in this case) are deducted
    • The visit no longer qualifies

Analysis of Your Refund Scenarios:

Using your original transaction of $21.90 pre-tax:

Refund Amount New Pre-tax Subtotal Above $10 Threshold? Points Deducted
$1.00 $20.90 Yes 0 points
$5.00 $16.90 Yes 0 points
$10.00 $11.90 Yes 0 points
$20.00 $1.90 No 3 points

Key Points to Remember:

  1. All-or-Nothing Approach: Unlike Spend-based programs, Visit-based programs don’t do partial point deductions. Points are either kept entirely or removed entirely based on whether the transaction still qualifies after the refund.

  2. Threshold Focus: The only consideration is whether the post-refund pre-tax amount stays above the qualification threshold.

  3. Original Points: The number of points originally awarded doesn’t change based on the refund amount - as long as the qualification threshold is met. :slight_smile:

5

Thank you for your detailed explanation — it was incredibly clear and helpful.
I now fully understand how point deductions work for refunds under the Loyalty Program’s Visit Rule.

Really appreciate your support!

Best regards,
Murphy