While you're a startup it doesn't matter much, but if you become a larger company, having the user's money that they haven't "spent" yet can be quite irritating for accountants, depending on which accounting method is being used.
In essence you have may have to refund "unconsumed" funds and this affects how you do your books.
Well, users' balances can be refunded whenever they want -- I'm not going to hold onto someone's money if they want it back.
As for the accounting side of things: My understanding is (at least as far as Canadian accounting goes, which is what matters to me) that it's handled as a liability called "unearned revenue". So while it's certainly something to be aware of for accounting purposes, it's not a big problem.
From the user perspective, I find this a very attractive policy. I considered it for my own business model.
Do you refund 100% of the initial fee or do you deduce some processing charges ?
I'm thinking of this 7 day full refund law abused in the domain name business. People would get a name, test its "responsiveness" in hits, and ask for a refund of names below a threshold.
What protection do you have against such type of abuse of your refunding policy ? Are the refunding cost "payed" by other clients ?
Do you refund 100% of the initial fee or do you deduce some processing charges ?
At the moment I refund 100% of any unspent amount. In light of payment processing costs, I might change this to deduct a small processing fee (say, $0.30 + 3%) in the future; but so far the number of people asking for refunds has been sufficiently small that it isn't really necessary.
I think domain tasting and tarsnap tasting are quite different concepts; I don't see any reason to open 10,000 tarsnap accounts and then ask for refunds. I'm also reminded of Joel's article about how, because he had a no-questions-asked full refund policy, he never had to actually give refunds. When a customer is asking for a refund seems like the worst time to nickel-and-dime them with fees.
In essence you have may have to refund "unconsumed" funds and this affects how you do your books.