What’s the Difference Between a Void and a Refund?

Every time a sale is processed, two distinct steps take place. The first step is the, which occurs instantly. When a card is swiped, dipped, or keyed in, the issuing bank of the customer's card is contacted, and an authorization is either granted or declined. If the authorization is given, the sale is approved and awaits processing. Most businesses authorize numerous sales throughout the day, and these approved transactions remain in your terminal or gateway until the end of the day.

The second step is called capture. This occurs at the close of the day when all authorized sales are sent to Allied Payments for processing. This stage is often referred to as settlement, batching, or capturing the previously authorized sales. Once a sale is captured, it is fully processed—meaning you receive payment for the sale, and the amount is deducted from your customer's bank account.

What's a VOID?

When you VOID a sale, you stop the sale from being captured. Essentially, you're removing the authorized sale from the list, which will be processed later. For instance, if you've processed ten sales today and realize one is a mistake, you can simply void it! Doing so prevents that sale from being sent for processing, leaving only nine transactions for capture. Consequently, the customer will see the authorization on their credit card but won't be charged since the sale was voided. After a few days, the authorization will disappear from the customer's card, and they won't be charged. Moreover, you won't be charged the discount rate (the percentage fee) for the sale as you never submitted it for processing, only incurring a small transaction fee.

The primary limitation of voiding a sale is that you must do it before settlement. Voiding is no longer possible once your sales are settled and sent for processing. In such cases, a refund is necessary.

What's a Refund?

Once you finalize or "capture" your sale, it’s irreversible. According to Visa/MC guidelines, the only way to correct or cancel an incorrect sale is by issuing a refund (also referred to as a return). When you process a refund, you perform an offsetting sale for the customer. This is standard and expected practice, but there are a few critical points to consider:

You incur costs for the original sale. The transaction went through, your customer was charged, you received payment, and the customer might still contest the sale. Thus, you will incur fees on the initial transaction.

Your customer's funds will be momentarily held. Unlike a void, which cancels the sale, a refund processes a second, offsetting transaction. So, your customer will first be charged the original sale amount, and only later, after the refund processes, will they see a matching credit in their account. This delay might sometimes cause customer frustration.

Given these limitations, we strongly recommend voiding sales if possible! This approach saves you money and helps keep your customers more satisfied.