Difference Between a Void and a Refund

Description: Learn the difference between a void and a refund below.

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Every time a sale processes, there are two unique steps. The first step is authorization, which happens in real time.

Authorization

When a card is swiped/dipped/Card Not Present, the issuing bank of the customer’s card is contacted, and an authorization is generated. The card is either approved or declined.

Assuming it’s approved, this sale is authorized and ready to be processed. Most businesses authorize many sales daily, and once authorized, the sales “sit” in your terminal/gateway until the end of the day.

Capture

The second step is known as the capture. This step takes place at the end of the day. All authorized sales from the day are sent for processing, and this step is known as settlement, batching, or capturing the previously authorized sales for processing. Once a sale is captured, it’s fully processed – you get paid for the sale, and your customer sees the funds debited from their associated bank account.

What is a Void?

When a transaction is voided, you are preventing the sale from being captured. In essence, you are removing the authorized sale from the list of sales to be captured/batched later.

If you have ten processed sales today and realize that one of them was a mistake, you can void that transaction. By voiding the sale, you prevent it from being sent in for processing. The customer still sees the authorization on their credit card, but they will NOT be charged for the sale since it was voided.

After a few days, the authorization “falls off” the customer’s card, and they’ll never be charged as long as it was voided correctly before they batched. And you aren't charged for the sale since you never submitted it for processing. Usually, the fee charged is just the authorization fee since the sale was still authorized. This fee is normally a few cents.

To void a sale, you must void the transaction before settlement/batch. Once you settle the sales, they’re sent for processing, and you cannot void them anymore. That’s where a refund comes into play.

If it is a debit sale, a refund is required because you cannot void a debit sale.

What is a Refund?

Once the transactions are “settled” or “captured,” the sales are in for processing. Per Visa/MC guidelines, the only way to cancel or undo a mistaken sale is to process a refund (also known as a return).

• You still pay processing for the original sale. It was processed, the customer was debited, and the transaction was batched for deposit. The customer could still dispute that sale.

• The customer will FIRST get debited the original sale amount. Then later, AFTER the refund processes, they’ll see an equivalent credit in their account.