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June 02, 2022
by David Goodale

What is a void, and why is it better than a refund?

(Slightly edited from video transcript for greater readability)

David Goodale:

Hello, David here at Today, I'm going to talk about voids and why they're better than refunds. They're actually way better than refunds. Stay tuned, we'll dig in in one second.

David Goodale:

A void and a refund are very different. In both cases, the cardholder gets their money back, but technically behind the scenes, it's totally different. A refund, well, you know what a refund is? I buy a pair of jeans. I take them home. I try them on the next day. They didn't fit the way that I thought or whatever it was. Knowing me, I probably didn't try them on at all. Sometimes I just, ah, this is my size. I'm sure it'll fit. it doesn't. I return it a week later, that's a refund. The card, the merchant is just pushing the money back onto my credit card. Avoid is different. Avoid is where you cancel the transaction from ever happening in the first place. avoid can only happen before the batch closes in technical terms. The batch is when you're like done processing for the day.

David Goodale:

It's like a thing. When you get a credit card approval, they're kind of sitting with your payment processor. Your payment processor needs to ask visa to actually send the money. that's when they send the batch of transactions to visa and visa sends it off to the card, issuers, the MasterCard, and then the money rolls all in. closing the batch happens daily. It might even happen multiple times a day, but I'm not going to get into that. The point is it's time sensitive. If you process a transaction, but you've not closed your batch, you can void it. Avoid is like it never happened in the first place. Visa never ha gets asked to settle the money. so avoid has a whole bunch of benefits. Well, not a whole bunch, but a few really good ones. First of all, there's no fees. There is no discount rate fees.

David Goodale:

There can never be discount rate fees, discount rate, the percentage based fee fee. You pay as a merchant that gets incurred when money moves. If money doesn't move, there's no fee second, you cannot get a chargeback. Did you know that If you refund a transaction, you can still get a chargeback. Now you're not supposed to. It's actually a mistake by the card issuer when that happens. But unfortunately, sometimes it does happen. If you void a transaction rather than refunding it, the card issuer, can't see the transaction, which means as a merchant, you cannot get a chargeback. Voids are actually good to use in an anti fraud situation where you got an inquiry. Let's say that you're a merchant and you see a transaction come and you look at it. You're like this doesn't look right at all. This looks like fraud, and I don't want to take this order.

David Goodale:

You void it, not just to save the fees because If the batch closes and then you later refund it, at least in theory, the transaction will still albeit temporarily show up on the cardholder statement and they might issue a chargeback for it. it's just better. that's the difference between A void and a refund. Voids are better generally, but they have a big problem. Once your batch closes, you can't avoid anymore. You must refund and a refunds are still good. You're still not supposed to get chargebacks for a refunded transaction. If you ever have a dispute or a concern, just get the money back to the card or void it. If you can't void it, refund it. I hope this answers why a void is better than a refund. If you have any more questions, reach out to us thanks for watching and have a good day there. Bye now.

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David Goodale About the Author

My name is David Goodale, CEO at Merchant I launched our business in 2001 and have over 20 years of expertise in the field of online payments. If you have a payments related question or project, and especially if it relates to multi-currency or international e-commerce don't hesitate to contact me. I'm always happy to help with an honest opinion, and enjoy chatting with folks from interesting businesses.

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