A refund is an operation that involves returning a purchased item or service in exchange for the money paid. The merchant is responsible for approving the refund. Once the merchant approves the transaction, the refund process will begin. The refund process ends once you have received the total amount of the purchase in your account.

If you made this purchase using the Exa Card as a debit card, after the refund is completed, you will be in the same position as when you first initiated the purchase since there are no associated interests to this transaction.

If the purchase was made using the Exa Card as a credit one, then the situation is different. Due to the nature of the Exa Card, there may be a financial cost associated with the refund operation. The amount refunded by the merchant will be the purchase amount, but you still need to pay the interest associated with that purchase. This is because, to make the purchase, you took out a borrow from Exactly Protocol, and you are obligated to repay the total amount of the purchase (which in this case will be covered by the merchant) plus the interest. While this additional amount may not be insignificant, it will generally be less than the original specified amount due to early repayment.

The discount you may receive will depend on the utilization of the pool at the current time since repaying early is equivalent to making a fixed deposit.

For example, if your purchase generates a borrowing of $100 from a one-year fixed pool with a fixed interest rate of 5% APR, your debt will equal $105 at the due date.

Now, let's say that a few days later, you get a refund because you returned your purchase, and by that time, the fixed rate for depositing $100 (in the same fixed rate pool) increases to 5% APR; you would repay your whole debt ($105) before maturity without any extra cost since in this example, the present value of its total debt discounted at the new fixed deposit rate ($105/1.05) is equal to his new deposit ($100).

In this way, if the utilization of a pool increases, the new fixed deposit rate will increase. Since the fixed-rate borrowers are incentivized to bring back liquidity before the maturity date, you will get a discount on your interests.

To understand more about how the discount for early repayment works, visit this document related to fixed-rate borrows in the Exactly protocol documentation.