Don’t Get Your Business Voided by Refunds

Posted by Rachida Essadiq on Sep 14, 2012 4:38:00 PM

Credit Card Processing AccountsMany business owners’ most dreaded conversation is the one with an upset customer demanding a refund on their credit or debit card.  The business processes the refund then calls it a day and the customer calls back a week later (this time irate) claiming the money has not yet been returned to his credit card account. Merchants are left scratching their heads wondering where the money has gone… There are some answers…

First of all, let’s get something straight. Every time a customer wants money back on a product or service, for whatever reason – IT DOES NOT ALWAYS HAVE TO BE A REFUND! There is a huge misconception by merchants or the employees taking payments for them that everything is a refund. If a customer pays for a product or service today, and returns it today (or before the credit card machine or software has batched out) then the transaction processed is a VOID not a REFUND. This will stop the payment from ever posting to the customer’s credit card. If businesses can remember this minor detail they can save themselves a lot of hassle with customers trying to get their money back. Not to mention voids don’t cost the business any money to process.

Refunds take time. There are many more steps involved in a refund than a void. When a business processes a refund it begins a whole new transaction. It sends the information to the card company, matches the sale information with the refund, confirms the request, clears the refund with a bank and then sends the credit to the customer’s credit card account- while costing the business a transaction fee for the refund “sale”. Every time one of these steps occurs there can be system outages, human errors, non-business days and billing cycles that slow up the process.


The kicker: Refunds can take anywhere from 2 to 30 days to be posted in an account, after your business has applied the refund! Mostly because credit card networks work with banks to transfer money from one place to another and all of these entities have their own policies on refunds that will often hold them up, leaving the business to answer to the customer, the only entity without any control of where the money goes.

It is advised that in order to avoid any extra trouble or unhappy customers a clause about this information is placed on your website, on receipts or next to the payment terminal (depending on your type of business).

Here is an example:

“We process most refunds the same day they are received {or whatever your policy is}.  Once we have processed your refund, it can take up to 7–10 business days for the funds to be released by your financial institution.  How long it takes for your funds to be made available depends on your specific financial institution – every financial institution is different, and once we process the refund we have no control over how long it will take for your funds to be released.”

Businesses need to stay informed on the best way to process different kinds of transactions and educate their customers on these processes so their business don’t catch a bad rap by the sometimes bureaucratic nature of banks and card networks.

Improving Dispute Resolutions for Businesses

Tags: Credit Card Processing, Debit Card Processing, accepting credit cards, credit card terminals, Banking, Credit cards, transactions, Terminals, refunds, customer service, voids