Refunds vs Voids: What the Card Rules Actually Require

What a void is

In day-to-day terms, a void removes a transaction from the open batch before it is sent for settlement. Visa's rules describe the network side. An acquirer must process a reversal for an online financial transaction if the transaction is later voided or cancelled. Visa's authorization reversal table says that when an approved transaction is not completed, the merchant must submit an authorization reversal within 24 hours of the earlier of the cancellation (or the cardholder deciding to pay another way) and the end of the approval's validity period. Once a transaction has been reversed in full, Visa says the merchant must not deposit it. The practical point: a void only works while the transaction is still in your open batch, so the batch close time on your terminal or gateway is the cut-off to know.

What a refund is

After settlement, the only route back is a credit transaction. Visa lets a merchant set its own refund policy but requires it to be disclosed. Where a merchant gives a refund, it must process the credit to the same payment credential used for the purchase to the extent possible. If that is not possible, the rules allow a secondary credential in some cases, or cash, check, store credit or a prepaid card in others, such as when there is no proof of purchase or the customer is returning a gift. A merchant must not process a credit without a previous purchase by the same cardholder. In the US, Canada and some other regions, any credit card surcharge must be refunded too, pro-rated on a partial refund.

How long the credit takes

There are two steps. Regulation Z, 12 CFR 1026.12(e), says a merchant that accepts a return or forgives a debt on a consumer credit card must send a credit statement to the card issuer within 7 business days, and the issuer must credit the account within 3 business days of receiving it. The underlying statute, 15 U.S.C. 1666e, says the seller must do this promptly. Visa's rules require a US issuer to post a credit to a credit card account within 3 business days of the settlement date, and to a Visa check card or prepaid card within 1 business day, unless circumstances or account history warrant a delay. What the customer sees also depends on when you submit the refund, so tell them the day you processed it.

Mistakes and late refunds

Visa's rules say that if a merchant processed a transaction in error, it must process a reversal or adjustment within 30 calendar days (45 for US PIN-authenticated Visa debit). Late refunds carry dispute risk. Under Visa's Credit Not Processed condition, a cardholder who received a credit or a receipt marked void or cancelled that was never processed can dispute. The issuer must generally wait 15 calendar days from the date on the credit receipt before disputing, and has up to 120 days from that date. Our refund policy guide covers wording, and the chargeback reason code guide covers the other dispute conditions.

Online and phone orders

If you sell by mail, internet or phone, the FTC's Mail, Internet, or Telephone Order Merchandise Rule sets deadlines when an order you cannot ship is cancelled. The FTC's business guide says that where the customer paid by credit from a third-party creditor, such as a card issuer, you must refund within seven working days after the order is cancelled; if you are the creditor, within one billing cycle. You cannot substitute store credit or vouchers for a refund the rule requires.

A worked example

Illustrative example only, with made-up round numbers. A cashier keys $800 instead of $80 at 2 pm and notices at 2:05 pm, before the batch closes. Voiding the $800 and running $80 leaves one settled sale; the $800 approval is reversed rather than settled. If the mistake is found the next morning after the batch closed, the shop refunds $720 to the same card instead, and the customer's statement shows both the sale and the credit. Ask your provider how each line is priced on your statement.