Void Transactions, Refunds, and Why They are Important for Your Business

What Is a Void Transaction?

A void transaction is often mistaken for a refund; however, they are two completely different terms. A void transaction occurs when a transaction, per a customer’s request, is canceled by the seller (or the merchant) before the amount payable settles through a customer’s credit or debit card. For example, you go to the mall to purchase some items; however, while you drive, you notice in your receipt that the cashier in the mall has somehow debited your account for goods you never purchased. Immediately, you call the cashier or the manager and inform them of the error, and then the manager can void the transaction.

In the scenario mentioned above, the charge on your account has not yet been made. This means that the mall has not yet received money from your debit or credit card account into theirs. Therefore, they can easily void the transaction and you will not be charged the amount.

The Technical Side of How it All Works

Now, in every payment terminal, there are two important elements: the merchant and the customer. For a transaction between the merchant and the customer to go through, the merchant must first swipe the customer’s credit or debit card. If the customer’s card has sufficient funds, the payment gateway or terminal will approve the transaction; however, the transaction is not completely settled. Payment will become settled when funds are finally released from the customer’s debit or credit card account into the merchant’s account.

In this stage, a transaction can still be voided since funds have not yet left the customer’s account to the merchant’s account.

So, can a Void be Carried out Without the Knowledge of the Merchant? No, a void can only be initiated by the merchant at the request of the customer. If a merchant accidentally overcharges you, you can always call the merchant and ask him to void the transaction.

How Long Does it Take for a Void Transaction to Take Effect?

Why Would a Business or Customer Void a Transaction?

    Mostly, if a void transaction is initiated, it should take effect within the same day.

    If I Notice an Error in a Transaction Twenty Four Hours after the Transaction was Made, Can the Transaction Still be voided? Except the merchant makes special transaction consideration that says that funds from card swiping will not be released into merchant accounts until after twenty-four hours, you may not be able to void the transaction. Voiding has to be done as quickly as possible before a transaction is approved by the customer’s account. Once a customer’s account releases funds to the merchant, a void can no longer be performed.

    There are many reasons a business or a customer can void a transaction. On the request of the customer: A business can void a transaction if it realizes that it has overcharged a client or charged a client for goods or services that were not rendered.

  • Online Merchants: Online merchants often allow transactions to take at least 24 hours before complete approval. Most times, payment gateways and financial institutions like PayPal do not allow fund approval until at least 3 business working days. This ensures that the customer receives the goods or services paid for before the transaction is cleared.
  • Fraud: Your card issuer usually place protocols to protect you from fraud. If one of such protocols is breached, your card issuer can hold a transaction, send you an alert about a pending debit on your credit or debit card. If you inform your card issuer that you did not approve such a transaction, they will void the transaction, and no funds will leave your account to the fraudulent account.
What are the Differences between a Void Transaction and a Refund?

Understanding Void Transactions and Refunds

Some people often confuse a refund with a void transaction. In this piece, we will explore the definition of both terms and what makes them different.

A void transaction is one in which a trade is canceled before funds are moved from the customer’s account to the business account. However, a refund occurs after funds have been successfully transferred from one account to the other. Below are the implications and differences between refunds and void transactions:

Refunds take longer to get approved: While a void transaction will generally get approved in a day and a customer will receive a notification of a void, a refund can take between two and thirty days before the customer’s funds will be returned.

Authorization

This is the type of transaction where a transaction pending will be placed on a credit card or a debit card user account and can be settled later.

Chargeback Period

This is usually the time frame within which a customer can dispute a transaction with the merchant such transaction was held. Once the chargeback period is up, pending transactions will immediately be cleared.

Chargeback

A chargeback is an amount payable to the customer or payment card after a dispute filed by the payer has been resolved in favor of the payer.

Protecting Yourself Against Fraud

Can I Request a Void Transaction if I Have Been Defrauded?

If your funds have been moved from your account to another account, then you have passed a chargeback period, and you can no longer request to void the transaction. If somehow, money has been fraudulently removed from your credit or debit card, then the best option will be to deactivate the card. You can contact your card issuer and the card will immediately be deactivated to prevent further loss of money. If you are a victim of credit card fraud, you may not even be able to successfully ask for a refund. This is because refunds are often approved by the recipient's account or bank.

A void transaction can only be successful if the transaction has not been completely processed and funds have not been transferred from the payer’s account. Therefore, if you feel like your card has been overcharged for certain goods, ensure you talk to your merchants.

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