An inevitable occurrence when running a business that accepts credit cards is hearing a customer wonder why you held their funds on a credit or debit card or where their money is from a refund. As a business owner you have other things to worry about besides wondering where the money is from a refund that you issued days ago. Below are some common questions regarding your merchant account that you may receive from your customers and information that will assure them that their money is on its way and assure yourself that you have taken the appropriate steps to get it to them.
Where’s my refund?
When you issue a refund from your merchant service account your customer expects to see the money returned to their bank account immediately. Unfortunately, if they have used a debit card, the Electronic Fund Transfer Act allows banks up to 10 BUSINESS days to decide whether or not to issue a refund to their bank account. In the case of debit cards, authorization holds can fall off the account, making the balance available again, anywhere from 1–8 BUSINESS days, after the transaction date depending on the bank’s policy. In the case of credit card processing, holds may last as long as 30 days, depending on the policies of the card issuing bank.
So while the banks take the money out immediately and you as the business owner processed a refund quickly, the cardholder’s bank will typically not reflect the refund for days or weeks after the refund was issued.
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Why Did I Get Charged Twice on an Authorization?
For example, if an individual makes a gasoline purchase by swiping their check card or credit card at the gas pump, then the pump has no way of knowing how much gas will be used. The pump typically authorizes a fixed amount, usually $50 but sometimes up to $100, to verify that the card is legitimate and that the customer has funds available. When the transaction is settled, it will actually post for the actual value of the purchase. Though the merchant will only process the transaction once, the initial hold will temporarily lower the customer’s available balance, potentially causing declined future transactions for the cardholder.
What to do:
Many times if a mistake is made when ringing up a transaction retailers will do a “void transaction” the same day which cancels the sale and prevents it from being processed. This system works fine with credit cards but with debit card transactions, once an approval code is obtained the money is going to be held until the bank chooses to release the funds so the initial transaction can still be held for a few days. Voided credit card transactions will ensure that the credit card is never charged and that any funds on hold will be released. Voids can only be processed the same day that the transaction is processed but are always less expensive and release the funds faster than a refund.
Authorization holds typically disappear the same day if a sale is also processed. If no sale is processed, then the hold can remain on the account for 7-14 days depending upon the bank. While some banks will respond to requests to release a hold, typically it’s best to simply wait for the hold to be released as few banks make exceptions.
Refunds do take longer to process than voided transactions so if you issue a refund, re-assure your customer that the funds will be returned to their account typically within 7 business days, but some banks can take longer. Providing the customer with a copy of the refund receipt will help demonstrate that the transaction was refunded, and that funds will be returned. The funds simply have to work their way back through the banking system and banks are notorious for holding funds immediately and replacing funds on their own schedule.
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