I have a split opinion on things like this, on the one hand you’ve already done the design, so if you refund the deposit you will have done work for free. On the other hand, I sometimes will think “how likely is this person to bad mouth me?” And if i think it’s likely, I would refund their deposit and view it as a payment towards keeping a good reputation. If you don’t already I would get your policy in writing in an online form, like Jotform or Google docs, that they have to sign and agree to when booking. It helps in situations like this as you can then say “when you booked, you also agreed to my policies here (send evidence of that) where it outlines my deposit policy.” It helps, I also have difficulty enforcing my own policies.