Void Transactions

Any transaction that a vendor or merchant cancels before it is processed through a customer's debit or credit card account.

Author: Matthew Retzloff
Matthew Retzloff
Matthew Retzloff
Investment Banking | Corporate Development

Matthew started his finance career working as an investment banking analyst for Falcon Capital Partners, a healthcare IT boutique, before moving on to work for Raymond James Financial, Inc in their specialty finance coverage group in Atlanta. Matthew then started in a role in corporate development at Babcock & Wilcox before moving to a corporate development associate role with Caesars Entertainment Corporation where he currently is. Matthew provides support to Caesars' M&A processes including evaluating inbound teasers/CIMs to identify possible acquisition targets, due diligence, constructing financial models, corporate valuation, and interacting with potential acquisition targets.

Matthew has a Bachelor of Science in Accounting and Business Administration and a Bachelor of Arts in German from University of North Carolina.

Reviewed By: Manu Lakshmanan
Manu Lakshmanan
Manu Lakshmanan
Management Consulting | Strategy & Operations

Prior to accepting a position as the Director of Operations Strategy at DJO Global, Manu was a management consultant with McKinsey & Company in Houston. He served clients, including presenting directly to C-level executives, in digital, strategy, M&A, and operations projects.

Manu holds a PHD in Biomedical Engineering from Duke University and a BA in Physics from Cornell University.

Last Updated:October 31, 2023

What are Void Transactions?

Any transaction that a vendor or merchant cancels before it is processed through a customer's debit or credit card account is known as a void transaction. The customer's account statement does not reflect it, despite this possibility. 

Depending on how the customer checks their account online, it might appear as a pending transaction. 

The merchant swipes the customer's debit or credit card to complete a transaction. The terminal authorizes the transaction if sufficient funds exist in the customer's account. 

However, the transaction is not entirely settled because payment from the customer's account to the merchant has not been released. The sale can be stopped because the transaction is still pending and hasn't cleared the customer's account.

Unless the merchant notices a mistake or issue and proactively cancels a transaction at the point of sale, the customer must contact the merchant and request that the transaction be reversed to be voided. 

When a transaction is voided, it appears on the customer's account as a pending transaction, which disappears after a certain period.

The customer will experience inconvenience because they won't be able to access the money for anywhere between 24 hours and several days while the hold is in place.

Any transaction canceled before the payment has been fully processed and the funds taken out of the customer's bank account is referred to as a "void transaction." Alternatively, in the case of credit card processing, it is not reflected on the cardholder's billing statement.

Before being applied to the customer's credit or debit card account, a transaction is void if the merchant has canceled it. Only transactions that have been authorized but not yet completed can be canceled.

A business may cancel a transaction within its payment point of sale or control panel to void it when a customer or business discovers an error with a transaction shortly after it has been completed.

Understanding Void Transactions

It refers to a purchase which is canceled after it has been approved, but before the purchase is made. This kind of agreement won't appear on the account statement, but it may occasionally appear in the pending record. 

After entering their account information, the client has the option to confirm it online. 

Within twenty-four hours, these actions will cease.

Fundamental components of any procedure involving a card are voids (debit or credit). If the transaction hasn't been settled yet, the card's owner could experience losses.

If so, you must request a refund of your money. The series of actions will be more precise in this case.

When money has been transferred from one account to another, the chargeback period has expired, and you can no longer ask for the transaction to be reversed. 

The best course of action is to deactivate your credit or debit card if money has been fraudulently taken from it. 

Your card issuer can be contacted, and the card will be immediately deactivated to stop further financial loss. However, even if you become a victim of credit card fraud, you might not be able to get a refund because banks or recipient accounts frequently authorize refunds.

Here are a few examples that will help you comprehend the full significance and function of this financial term:

  • Because this was just a void transaction, Morris' money was not taken out.
  • Emma's online outfit renewal was unsuccessful because the payment was canceled.
  • Laura's online luggage renegotiation was unsuccessful because the purchase was canceled.

How Void Transactions Work

The merchant can cancel a transaction if it was made inadvertently or if the customer wants to do so before it is completed. 

It is also possible to cancel fraudulent transactions that haven't finished processing. By nullifying the transaction, the consumer's bank will not be charged or debited for it, and the merchant's bank will not pay the transaction. 

The void must occur after the transaction has been authorized but before it has settled to happen successfully.

1. Authorization and Settlement and Void Transactions

The merchant authorizes your payment when you use a credit card or debit card to make a purchase. In essence, authorization verifies that you have a working card and enough money on hand to complete the transaction. 

Your transaction is bundled with others, typically made that day and submitted for settlement.

The merchant's bank, the credit card issuer, and the card network negotiate payment and fees with the merchant during the settlement process. Eventually, the transaction is settled once funds are deposited into the merchant's account.

2. Void Process and Void Transactions

Following authorization, there is only a brief window during which a transaction may be revoked. Payment settlement can take one to two business days. If customers see a transaction that needs to be canceled, they must contact the merchant directly. 

Afterward, the merchant can cancel the transaction in their control panel, point of sale, or admin interface for the payment gateway, depending on how the payment was received.

Even if the transaction was successfully voided, it might still show up as pending on the user's bank or credit card's online transaction list and might still be holding some of the user's available funds. 

Luckily, the transaction should vanish in two to three business days, when the funds will be released. 

The final transaction won't appear on the cardholder's bank or credit card statement after a transaction has been voided. Merchants may be able to submit an authorization reversal after canceling a transaction to release the hold on the funds and make them available once more. 

The card issuer must support the transaction, and the merchant must provide accurate information for the authorization reversal to be successful.

Void Transactions vs. Refunds

These are two distinct things. First, no money is transferred from the customer's debit or credit card company to the merchant when a transaction is void. 

Refunds are only given after a sale has concluded and the customer has paid for the product or service.

Some businesses and credit card processing platforms might settle transactions instantly. However, the seller cannot cancel an immediate settlement transaction; instead, they must issue a refund.

Instead of void transactions, refunds may take much longer to reach a customer's account. Refunds can take anywhere from 48 hours to 30 days to appear on a customer's account, depending on the circumstance.

Contrary to popular belief, the two concepts are unrelated to each other. The transaction is void when the transaction is canceled by the seller (or the merchant) at the customer's request before the amount due is processed through the customer's credit or debit card. 

For instance, let's say you go to the shop to buy some goods. However, as you're driving home, you discover on your receipt that the shop's cashier somehow deducted money from your account for items you never bought.

You immediately inform the cashier or manager of the error, and they can cancel the transaction.

The charge on your account has not yet been made in the scenario mentioned above. This indicates that funds from your debit or credit card have not yet been transferred into the mall's account. 

They can easily cancel the transaction, and you won't be charged.

Voiding Fraudulent Transactions

False charges may be canceled. In addition, companies that issue credit cards have fraud detection systems to identify suspicious transactions.

The vast majority of businesses pause these transactions. When a customer checks with the company to see if a transaction is fraudulent, the transaction is immediately canceled. 

Many card companies will automatically void a suspicious transaction before settling it if a customer cannot be reached for verification. If mistakes are discovered immediately, voiding transactions can quickly fix them. A customer might find they were overcharged, for instance. 

When customers pick up their bags after paying for their food, they discover that the cashier unintentionally added some of the items belonging to the person after them to their order. 

The cashier can cancel the transaction, scan the right items a second time, and charge the customer the right amount. Some retailers might give customers a limited time window to cancel an order. 

This scenario frequently happens to online retailers. A buyer often has the choice to return an online purchase within 24 hours.

Role of Digitalisation of Payment Services

The canceled transactions are wholly digital. When a customer pays with a debit or credit card, he can cancel the transaction.

Assume that a customer who is paying in cash has the choice to halt the transaction or request a refund.

In this scenario, there is no way to render the transaction null and void.

Digitalization has made it easier for businesses to keep track of transactions and has enabled online transactions. However, such transactions come into play when an error happens, and the only logical course of action is to cancel the transaction.

Examples

Let's take an example: you use a credit card terminal to buy an 80-dollar wedding gown from a boutique. Unfortunately, the salesperson accidentally typed $90 into the terminal instead of $80 and swiped your credit card simultaneously. 

The employee can cancel the transaction immediately, effectively removing it from the day's sales totals.

The void dealing won't finish processing in this situation and eventually disappears from the customer's account statement.

Suppose a buyer purchases a bedsheet online and accidentally purchases three of them. To correct his order, he can immediately cancel the transaction before it has been completed. 

When a transaction is canceled, money will no longer be sent from the buyer's to the seller's bank account. The buyer can try to check out once the order has been rectified, but it will show as two transactions.

  1. The initial one was canceled (the transaction will stay for a few hours and disappear eventually).
  2. The other legitimate transaction.

Void Transactions FAQs

Researched and authored by Drishti Kohli | LinkedIn

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