Refunds and Voids – What’s the Difference?

There will be times for whatever reason that your customers will ask for their money back. When is it considered a refund and when is it considered a void?

A void is when you cancel the transaction before it has a chance to settle. Usually it’s only possible to void a transaction the day you originally obtained the authorization on the sale, as most credit card processing hardware and software solutions will settle your transactions on a daily basis.

By voiding the transaction, the original sale amount will not post to your customer’s credit card account. However, even though your customer’s credit card will not be charged, there may still be a temporary hold on the original amount that was authorized. This is called a “soft charge” and it can last up to 5-7 business days until it is removed. Because of this, some of your customers may think you actually charged their card when it’s really just a temporary hold on funds. If they ask you about this, just have them check with the company that issued their credit card. The charge should be listed as “pending”, not as “posted”. If by some chance it has posted, then you need to do a refund.

A refund needs to be processed if the transaction has settled. Example: a customer orders from you and you realize you’re out of stock on that item. You contact your customer and they reply 2 days later and state they want a refund. Since the transaction has settled by this time, you need to do a refund instead of a void.

Most internet merchant account processing gateways and credit card terminals will allow you to process a refund up to 90 days from the time you originally charged the customer’s credit card. It normally takes anywhere from 3-5 business days for the refund to post to your customer’s credit card once the refund has been processed.

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