Hi Alison
Interesting question,thought ianjofriel was right though...but checked and here is what they say on Paypal
If the sender used their PayPal balance or bank account, the money will be refunded to their PayPal account balance
If the sender used their credit or debit card, the money will be refunded to their card. This may take up to 30 days to appear on the card statement.
For payments funded partially by credit or debit card and partially by balance, PayPal refunds the card portion back to the card and the remainder to your PayPal balance
The refund will be credited to the sender in the currency of the original payment, using the same conversion rate used for the original payment
When you refund the money you received, PayPal also refunds any fees that were charged to you
