Void transactions are transactions that are canceled by a seller or trader before the transaction is settled through a customer’s card account. A void transaction cancels the initial transaction as if it did not take place and usually takes two to three business days to take effect. When a sale is voided, the sale is not captured or settled.
A few examples of transactions that are mostly voided are fraudulent purchases, incorrectly charged merchandise, mistaken charges, etc. Such transactions will not appear in the statement of account but can appear as pending transactions.
When a transaction is pending, a customer will not be able to access the amount in question. A transaction must get voided before the settlement.
Once the transaction is settled and sent for processing, it can no longer be voided. The customer gets charged if the transaction is not voided, and the only way to reverse the process is through a refund.
Void transactions are transactions that are canceled by a seller or trader before the transaction is settled through a customer’s card account.
Voiding a transaction in case of fraud is different from refunding the amount involved in the transaction.
A transaction is voided before the settlement phase, whereas a refund takes place after the settlement phase and the transfer of money.
How is a Debit Card/Credit Card Sale Processed?
There are two different steps for processing a sale through debit or credit card.
Authorization takes place in real time – as soon as the card is swiped. The customer’s bank is contacted, and authorization is generated. Once the card is approved, the sale becomes authorized and is ready to be processed. The sales of the day are held in transit until the end of the day.
Capture takes place after the sale’s been authorized. All authorized sales of the day are sent for processing. Once the sale is captured, the merchant gets paid for the sale, and the customer’s bank account gets debited.
Void Transaction vs. Refund
1. A transaction is voided before the settlement phase, whereas a refund takes place after the settlement phase and the transfer of money.
2. A refund is money returned to a customer to offset an initial sale. Unlike void transactions, refunds involve the transfer of money between accounts of parties involved.
3. Refunds take place after an order’s been satisfied. The customer’s funds are held during the process of a refund, and after the refund processes, their account gets credited.
4. Refunds usually take more time to reflect than void transactions. It is more time- and cost-efficient to void a transaction than to ask for a refund later.
Voiding Fraudulent Transactions
There are numerous fraudulent transactions that take place online. To counter the problem, card-issuing companies install fraud identification services and software.
The customer is given the option to verify the authenticity of a transaction with the company, and they will void the transaction immediately if it is fraudulent in nature.
In case the customer does not respond for verification, many card-issuing companies, by default, void such a transaction. It is done much before it reaches the settlement phase to ensure that the customer is safe and secure.
Mistakes are corrected by voiding transactions immediately during a purchase. For example, a customer walks into a retail store selling sports equipment and is charged incorrectly. The cashier can then void the transaction, redo the item scanning, and charge the customer correctly.
As is the case with most e-commerce platforms, merchants allow a certain time period to cancel a purchase made by a customer. It is done as there is a lot to choose online and to allow customers to change their minds once they make a purchase.
In such a case, the settlement does not take place for a certain period. If the purchase is canceled within the period, the merchant voids the transaction, and the buyer is not charged.
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