A void transaction refers to a transaction canceled by the vendor before the payment is released from the consumer’s bank account. The merchant or vendor rejects or cancels the consumer’s credit or debit card transaction before it is processed by the consumer’s bank.
Void transactions do not appear on your bank statement because the payment was never made to a vendor in the first place. They might appear as pending in the transactions section of the mobile banking app before being marked void.
Void transactions are not to be confused with refunds in which the transaction is processed, and money is sent to the vendor or merchant and then requested back
Reasons for Void Transaction
A transaction becomes void when the terminal does not authorize the transaction. When a customer pays a vendor online or physically by swiping a credit or debit card, the transaction enters processing.
If there is a problem in payment processing, the payment becomes pending and is not released to the bank account. Only when the terminal authorizes the transaction, the payment is released to the vendor to settle the transaction.
The most common reason for void transactions is insufficient funds in the bank account. The vendor can also notice a problem or mistake in the transaction to cancel the incoming payment which also voids the transaction.
For instance, while packing your groceries at the supermarket, the cashier may notice that they have charged you for the groceries of the next customer, hence they will have to void the transaction that is underway and charge you again.
Some online sellers allow buyers a time window to cancel a purchase during the first 24 hours of their purchase if they change their mind. The payment remains pending during this time and becomes void if the buyer cancels the purchase.
Sometimes payments can also become void if the bank suspects fraudulent activity. If the bank suspects that your card was stolen or online purchase is occurring fraudulently, the bank might void the transaction and contact you for confirmation.
Void Transaction vs Refund
A void transaction occurs almost immediately or within a few minutes. Sometimes, the transaction is in pending status for up to 24 hours before it becomes void.
Because the transaction cannot be settled, it appears as pending or voids in the consumer’s mobile banking application. Rarely, the bank can hold onto the money for 24 hours or more, making it inaccessible for the bank account holder during the holding period.
In a void transaction, no money is transferred to the vendor, even if it remains inaccessible to the account holder, it is held by the bank.
A refund is when the payment is processed and the transaction is settled, sending payment to the vendor. The refund occurs when the funds are
Refunds usually take longer than void transactions. Some refunds can occur within 48 hours while others can take several days or up to 30 days before the refund is finally reflected in the consumer’s available account balance.
If a transaction settles too quickly leaving no time for the vendor or the bank to check for issues and void it, it needs to be refunded back. Therefore, a void transaction can also turn into a refund sometimes.