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When you originally paid for the item, instead of logging in to a PayPal account, you simply entered in your credit card (CC) information. However, when you pay this way, PayPal is still "processing" the payment for the seller. So basically what happens is, you're paying with PayPal but not creating an account that can be accessed at a later time. So when a refund is made on one of these transactions, the funds are automatically returned to the CC or debit card you used. You should see these funds on your CC balance within 5 business days, however if it takes longer, you'll want to contact your CC company to find out the status of the credit.
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Source(s):
www.PayPal.com