What Is a Void Transaction?

A void transaction is a debit or credit card transaction that is canceled by the merchant before it is settled by the cardholder's bank and the merchant has received payment. Transactions are often voided when customers or merchants discover that an error has occurred, or when fraud is suspected.

How Void Transactions Work

When a credit or debt card transaction takes place, the merchant's point-of-sale (POS) terminal relays that information electronically through a card network. If the network determines that the card is valid and the customer's bank determines that there are enough funds or sufficient credit in the account to cover the charge, the terminal authorizes the transaction. These steps, which usually take place in a matter of seconds, are known as authentication and authorization.

But the transaction is not finished until a later step, called settlement, when payment is released from the customer's account and transmitted to the merchant's bank. If there appears to be a problem with the transaction, it can be voided up to this point, and the money will not move.

Transactions may be voided for a number of reasons. Perhaps the customer has changed their mind about a purchase and asked the merchant to void it. Or, the merchant may have noticed a mistake of some sort and proactively voided the transaction. Once voided, the transaction will show up on the customer's account as a pending transaction and then disappear after a certain amount of time.

Pending transactions put a hold on the money that can last anywhere from 24 hours to several days. That can be an inconvenience for the customer because they won't be able to access the money during that time if they need to use their card again.

Examples of Void Transactions

Problems With Purchases

Mistakes can be easily corrected by voiding transactions if they are recognized immediately. For example, a shopper who has just paid for their items at a grocery store might pick up their bags and discover that the cashier accidentally included some of the next customer's items. The cashier can void the transaction, re-scan the correct items, and charge the customer the correct amount.

Some merchants may allow a certain window of time to cancel a purchase if the customer changes their mind. This often occurs with e-commerce sellers, where a buyer might have the option to cancel an online purchase within 24 hours. If they do, the seller will void the transaction, the buyer won't be charged, and the goods won't ship.

Fraudulent Transactions

Potentially fraudulent charges can also be voided. Card issuers have fraud detection procedures to flag suspicious transactions before they can be completed. Most card companies will place these transactions on hold until the customer can verify whether the transaction was legitimate. If the customer says it wasn't, the company can then void it. When a customer cannot be reached for verification, many card companies will automatically void a suspicious transaction before it is settled.

Void Transactions vs. Refunds

Void transactions are different from refunds. With void transactions, the transaction is stopped before any money is transferred from the customer's account to the merchant's. Refunds, however, are issued after a transaction has settled and the merchant has received payment.

Some merchants and credit card processing systems may settle transactions immediately. When a transaction settles immediately, the seller can only issue a refund rather than voiding the transaction. Compared with void transactions, refunds can take much longer to complete. Some refunds may be reflected in the cardholder's account within 48 hours, but others can take as long as 30 days.

The Bottom Line

Void transactions stop the payment process for credit or debit cards before the merchant receives any payment. Transactions can be voided only in a relatively small window of time, after which the cardholder may need to request a refund to get their money back.