What Is a Void Transaction?
A void transaction is a credit or debit card transaction that is canceled by the merchant before it is settled by the cardholder’s bank and the merchant has received payment. Transactions are often voided when customers or merchants discover that an error has occurred, or when fraud is suspected.
Key Takeaways
- A void transaction is a credit or debit card purchase that is canceled before any money is taken from the cardholder’s account.
- Even when a transaction is voided, it may show up as a pending transaction on the customer’s account statement for a short period of time.
- Void transactions are different from refunds, which are issued after a transaction has cleared through the customer’s account and the merchant has been paid.
- Mistaken charges, returns, and suspected fraud are common reasons a transaction may be voided.
How Void Transactions Work
When a credit or debit card transaction takes place, the merchant’s point-of-sale (POS) terminal relays that information electronically through a card network. If the network determines that the card is valid and the customer’s bank determines that there are enough funds or sufficient credit in the account to cover the charge, the terminal authorizes the transaction. Authentication and authorization are the steps where the network and the bank play crucial roles.
But the transaction is not finished until a later step, called settlement, when payment is released from the customer’s account and transmitted to the merchant’s bank. If there appears to be a problem with the transaction, it can be voided up to this point, and the money will not move.
Transactions may be voided for a number of reasons. Perhaps the customer has changed their mind about a purchase and asked the merchant to void it. Or, the merchant may have noticed a mistake of some sort and proactively voided the transaction. Once voided, the transaction will show up on the customer’s account as a pending transaction but will disappear after a certain amount of time.
Pending transactions put a hold on the money that can last anywhere from 24 hours to several days. That can be an inconvenience for the customer because they won’t be able to access the money during that period if they need to use their card again.
Note
A void transaction generally takes place on the same day as the original transaction.
Examples of Void Transactions
Problems With Purchases
Mistakes can be easily corrected by voiding transactions if they are recognized immediately. For example, a shopper who has just paid for their items at a grocery store might pick up their bags and discover that the cashier accidentally included some of the next customer’s items. The cashier can void the transaction, re-scan the correct items, and charge the customer the correct amount.
Some merchants may allow a certain window of time to cancel a purchase if the customer changes their mind. This often occurs with e-commerce sellers, where a buyer might have the option to cancel an online purchase within 24 hours. If they do, the seller will void the transaction, the buyer won’t be charged, and the goods won’t ship.
Fraudulent Transactions
Potentially fraudulent charges can also be voided. Card issuers have fraud detection procedures to flag suspicious transactions before they can be completed.
Most card companies will place these transactions on hold until the customer can verify whether the transaction was legitimate. If the customer says it wasn’t, the company can then void it. When a customer cannot be reached for verification, many card companies will automatically void a suspicious transaction before it is settled.
Because refunds are issued after the money has already passed through a customer’s account to the merchant, the process can take longer than with a void transaction.
Void Transactions vs. Refunds
Void transactions are different from refunds. With void transactions, the transaction is stopped before any money is transferred from the customer’s account to the merchant’s. Refunds, however, are issued after a transaction has settled and the merchant has received payment.
Some merchants and credit card processing systems may settle transactions immediately. When a transaction settles immediately, the seller can only issue a refund rather than voiding the transaction.
Compared with void transactions, refunds can take much longer to complete. Some refunds may be reflected in the cardholder’s account within 48 hours, but others can take as long as 30 days.
What Is a Chargeback or Reverse Transaction?
A chargeback, sometimes referred to as a reverse transaction, is much like a refund, in that a customer gets their money back, in this case by having it credited to their credit or debit card account. These transactions can be initiated willingly by the merchant or forced on them by the cardholder or card issuer. For example, if a customer claims that a product was faulty and the merchant refused to take it back, they can ask their card issuer to have the charge reversed. Merchants can also dispute a chargeback.
What Does ‘Posting’ Mean With a Credit or Debit Card?
Posting refers to the point at which a credit or debit card transaction has been completed, and the money has moved out of or into the cardholder’s account. The date that will be reflected on their statement is known as the post date or settlement date. In many cases, it will be later than the date the transaction actually occurred.
Why Are Credit or Debit Card Transactions Declined?
Credit and debit card transactions can be declined for a long list of reasons. For example, a credit card might not have a sufficient credit line to cover the charge or the checking account linked to a customer’s debit card may lack enough cash. Transactions can also be declined if the card has expired, the customer entered incorrect PIN or other information, or the credit card company suspects fraud, among other causes.
The Bottom Line
Void transactions stop the payment process for credit or debit cards before the merchant receives any payment. Transactions can be voided only within a relatively short window of time, after which the cardholder may need to request a refund to get their money back.
Related Terms: settlement, refund, chargeback, credit card posting, pending transactions.
References
- Capitol One. “What to Know About Pending Transactions”.
- Consumer Financial Protection Bureau. “How Can I Get a Refund on a Product or Service I Purchased With My Credit Card?”
- Discover. “What Is a Credit Card Post Date?”
- Federal Trade Commission Consumer Advice. “When a Company Declines Your Credit or Debit Card”.
- Chase. “Why Was My Credit Card Declined?”
