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What Is the Difference Between a Refund and Void Transaction?

Refunding a transaction returns money back to a customer's credit card; it takes three to five business days for the transfer to complete. A void transaction cancels the original transaction as if it never happened and needs one to 3 business days to take effect.

Refunds should be used in the case where a charge has already been captured and settled. Voids should be used when an authorization or charge has been made, but the transaction has not been settled yet. Voids are more cost effective than refunds (but only works on unsettled transactions). Credit card transactions work in two phases:

Authorization and Charge Phase

This is the initial step that authorizes a charge to a customer's credit card. At this point, a six-digit authorization or approval code is given to the merchant and the funds are earmarked and set on hold. The funds have not been transferred yet.

Capture and Settle Phase

This is the final step that confirms that a merchant actually wants to transfer the money from a customer's credit card to the merchant's checking account. By default, PayJunction settles all transactions at 5 p.m. Pacific Time (unless you changed your terminal settlement settings).

Define Refund, Define Voided

The merchant has the ability to edit or void a transaction up until the capture or settlement phase. Voiding a transaction will tell the customer's issuing bank that the merchant does not intend to collect the transaction corresponding to the original six-digit approval code (and therefore those held funds are made available to the customer again). Capturing and settling the funds tells the customer's issuing bank that the merchant wants to transfer the money (corresponding to the six-digit approval code) from the customer's credit card to the merchant's checking account. Once the funds have been captured or settled, the merchant cannot cancel the order (a refund would be necessary after this point to give the money back to a customer). At this time, a customer will start accruing interest on their credit cards (if applicable per the customer's credit card issuing bank).

A voided credit card transaction will tell the customer's issuing bank that the merchant does not intend to collect the transaction corresponding to the original six-digit approval code (and therefore those held funds are made available to the customer again). Capturing and settling the funds tells the customer's issuing bank that the merchant wants to transfer the money (corresponding to the six-digit approval code) from the customer's credit card to the merchant's checking account. Once the funds have been captured or settled, the merchant cannot cancel the order (a void credit card transaction is unavailable, instead a refund would be necessary to return the money to the customer). Watch a video detailing how to void and refund within our system.