Google will also change its billing practices to ensure that in the future it gets 'express, informed consent' before charging an account.
The changes and refunds come as part of the terms of Google's settlement with the US Federal Trade Commission (FTC), following claims that Google had billed customers for purchases made without their consent.
Google will spend at least $19million reimbursing US parents who had to pay large bills for unauthorised in-app purchases made by their children while playing game apps such as Ice Age Village and Air Penguins on mobile devices.
The FTC claims that Google had billed customers for these purchases without gaining their consent, and employees referred to the issue as 'friendly fraud' and 'family fraud'.
"For millions of American families, smartphones and tablets have become a part of their daily lives," said FTC Chairwoman Edith Ramirez.
"As more Americans embrace mobile technology, it's vital to remind companies that time-tested consumer protections still apply, including that consumers should not be charged for purchases they did not authorise."
Google said that it implemented changes in March 2014 to make it clearer when real - as opposed to virtual - money was being spent, and it had allowed consumers to choose whether they wanted to be prompted to enter a password before each purchase, as a way to avoid unauthorised purchases by children.
"We're glad to put this matter behind us so we can focus on creating more ways for people to enjoy all the entertainment they love," said a Google spokeswoman.
In January, the FTC settled a similar case with Apple Inc. Apple agreed to refund at least $32.5million to customers.
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