What happens to points on refunds and cancellations?

When an order is refunded or cancelled, the points earned from it are taken back with a reversing entry. History is never deleted; the point history shows both the earn and the refund movement.

Effect on tiers

The refunded amount is also removed from the spend used for tier calculation, so the amount left to the next tier may increase after a refund.

If the points were already spent

The customer may have spent points from the refunded order on another purchase. In that case the balance can go negative or is handled according to your store rules; see the refund settings in the admin.

Why reversing entries?

Reversing entries let you show every movement with its date and reason if a customer asks, and keep things transparent for accounting.