Void TransactionHow Voiding a Transaction Before Settlement Can Actually Save You Money

Should You Refund or Void Transactions? Which is the Better Option for Your Bottom Line?

Generally speaking, if a customer asks you to cancel a transaction they have just paid for, what they’re really asking you to do is “void” that transaction.

This means that you would have to look up and void (or manually cancel) that transaction before settlement occurs. But, timing is of the essence. 

If the void transaction order doesn’t go through before settlement, your only recourse is to refund the purchase. This will cost you more time and money to resolve. But… why?

Let’s go over the process together and see what voided transactions are, how long a voided transaction takes, and outline when they’re a good option.

What is a Void Transaction?

Void Transaction

[noun]/void • tran • zak • SH(ə)n/

A void transaction (or transaction void) is a transaction that is canceled by a merchant before it reaches settlement. Once a transaction has been “settled,” it’s effectively complete and can no longer be nullified. But, a transaction void lets you cancel fulfillment before that happens.

If you void a transaction, then the cardholder’s bank won’t charge (or debit) the cardholder’s account for that purchase. Also, you won’t be charged any credit card processing fees for the transaction.

A transaction can only be voided if it has been authorized, but not settled. So, you have to stop it from processing before it settles with your merchant service provider or payment processor. For most merchants, transactions are batched and sent for settlement at the end of each business day, so you generally have until that cutoff to void any transactions processed earlier in the day.

A void may appear on a cardholder’s account as a pending transaction until it eventually drops off. As you might guess, this can be a point of confusion between consumers and merchants. So, work with your processor to ensure that the descriptor that shows up on your customer’s statement is as clear as possible.

Is a Void Transaction the Same as a Refund?

Voided transactions are often confused with payment cancellations, as well as payment reversals like refunds and authorization reversals. While these are all related processes, they’re all still distinct. To illustrate, let’s compare voided transactions to refunds.

When a transaction is voided, no money ever leaves the customer’s account. Refunds, on the other hand, occur after a transaction is settled and funds have been removed from the cardholder’s account.

Remember, refunds also take a lot longer to process than voids. Because the funds have to be rerouted from your account to the buyer, there are more steps and moving parts at play.

Lastly, instant capture can also be a factor in void transactions. That is, if you use a third-party payment aggregator like Stripe or Square and have opted into instant transfers, then payments generally settle on the same day as the transaction. If instant capture is enabled, you would naturally be unable to void these transactions unless you manage to catch them immediately.

How Do I Void a Transaction?

Voiding a transaction is very simple. Most processors allow you to perform this function in seconds through an online dashboard with just a couple of clicks.

With omnichannel POS and payment solution provider Bindo Labs, for instance, you can simply select a transaction from the list of transactions processed during the day in question, click on the options button and select “Void Payment.”

PayJunction has a similar process. You’d use their virtual terminal to search for the order in question, using the customer’s name or other information that can help identify the transaction. You then simply select the transaction you wish to void, and and click the “Void” button:

Again, most processors will have a similar function in place to easily void a transaction before it is batched and processed. But, now that we have a better understanding of how the void transaction process works, let’s talk about when and how you’d likely initiate one.

Communicating Voided Transactions to Customers

Even after you void a transaction, the charge may still appear as “pending” on the customer’s bank statement. This is normal. But, it can also cause confusion if the customer checks their account before the hold drops off.

In most cases, a voided transaction will disappear within 72 hours, though the exact timing depends on the customer’s bank. Some financial institutions release holds faster than others, and weekends or holidays can extend the timeline.

When a customer asks about a pending charge you’ve already voided, a brief explanation usually resolves the concern. Something like:

“We’ve canceled the transaction on our end, so you won’t be charged. Your bank may still show it as pending for a day or two, but it will drop off automatically. There’s no action needed on your part.”

This kind of proactive communication can prevent unnecessary frustration. More importantly, it can stop the customer from calling their bank to dispute a charge that’s already been voided.

When Should You Void a Transaction?

There are a few different situations in which you might want to void a transaction. Three of the most common reasons for this are because an error was made, a customer has changed their mind, or because fraud is suspected.

In the two former cases, you would simply want to cancel the transaction before it is settled. However, in the latter circumstance, you’d be attempting to stop a transaction before the money is stolen from you or your customer.

Still not entirely clear? Here’s a quick example.

Let’s say you’re a restaurant manager. You’re training a new employee, and she accidentally rings up the wrong meal on your customer’s credit card. If you get to it right away, the transaction can be voided, removing it from sales tallies for the day. It won’t be charged to the customer’s account; it will be as if the transaction never happened.

If no one notices the mistake until the transaction has already been settled with the cardholder’s account, you would then need to process a refund or issue the customer a credit to make up for the mistake.

Obviously, catching it as early as possible is the best possible outcome since you wouldn’t need to pay the processing fees for the sale. That's the main advantage of voiding a transaction as compared to other options like refunds.

Voiding Transactions as a Chargeback Prevention Tactic

Here’s another common scenario: a customer notices a duplicate charge on their account. Rather than waiting for a refund, the customer panics and calls their bank to dispute the charge. Now you’re dealing with a chargeback.

On the other hand, if you catch the mistake before settlement, and you’re able to void the transaction, then there’s nothing left to dispute. The charge disappears from the customer's pending transactions, and the issue is resolved cleanly. The same logic applies to issues like pricing mistakes, accidental charges, or orders the customer wants to cancel; if the transaction hasn’t settled yet, you can void it, and the problem is immediately solved.

This is why training your team to recognize void-eligible situations — and to act quickly in those cases — can directly reduce your chargeback volume. Every transaction you void before settlement is one less opportunity for a customer to escalate the issue to their bank.

End-to-End Coverage Against ALL Chargeback Sources

The void transaction process can save you some headaches. However, it’s best to avoid the errors and suspected fraud cases that cause voided transactions in the first place.

Not sure where to start? No worries: Chargebacks911® has got you covered.

Chargebacks911 offers the industry’s most comprehensive, end-to-end solution for chargebacks, regardless of dispute source. Our merchant-focused platform helps you eliminate errors that cause chargebacks at every stage of the transaction process, from pre-purchase to long after fulfillment.

Ready to take the next step in combating all types of chargebacks and recovering more revenue? Contact us today for a free chargeback analysis to diagnose your business’s risk level.