What is a 'Void Transaction'

A void transaction is a debit or credit card purchase that is canceled after it has been authorized but before it has been settled. A void transaction does not appear on the customer’s account statement, though it might appear in a list of pending transactions when the customer checks their account online.

BREAKING DOWN 'Void Transaction'

A void transaction can be caused by a few different factors. It is different from a refund which is typically initiated after transaction settlement. In a void transaction, no money is ever actually transferred from the customer’s debit or credit card company to the merchant. A void transaction can cause problems for customers because even though the seller canceled the transaction, the customer may find that their card has a hold on the amount of funds involved in the canceled transaction. The hold can last several days, and the cardholder won’t be able to access the money during that time. This can cause a temporary inconvenience for the customer.

Some merchants and credit card processing systems may actually settle transactions immediately. When a transaction settles immediately, the seller would have to issue a refund rather than void the transaction.

Voiding Purchases

Voiding transactions allows for mistakes to be easily corrected if recognized immediately. In some situations a buyer may find that they have been charged incorrectly. For example, a grocery store customer who has just paid for her items picks up her bags and realizes that the cashier accidentally included some of the next customer’s items in her purchase. The cashier could void the transaction, re-scan only the correct items, and charge the customer the correct amount.

In other situations, some merchants may allow a window of time for investors to cancel a purchase. This can occur often with e-commerce merchants. When shopping online a buyer often has the option to cancel their purchase within 24 hours. If an electronic purchase is cancelled the seller typically voids the transaction prior to proceeding to settlement and the buyer is not charged for the purchase.

Fraudulent Charges

Fraudulent charges transacted through identity theft are another type of transaction that typically get voided. Often card issuing companies will have fraud detection services in place to flag fraudulent transactions. These transactions are usually placed on a hold with a pending status until the customer is contacted. When contacted the customer can verify that a transaction is fraudulent and then it will immediately be voided. If a customer cannot be reached for verification many card companies will automatically void a suspicious transaction before it proceeds to settlement to ensure the safety and security of the customer.

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