100 points = $1 that can be redeemed on future purchases
Typically an order is $49.99 so the customer would earn $2.50 toward a future purchase.
Returned/refunded/partially refunded orders will have their points adjusted accordingly. So because the customer returned their first order, they no longer have 500 points - they have 250.
They can only be used on future purchases so a customer cannot place an order, and then ask for the points to be refunded from the same order.