Where’s My Money? 3 Ways to Avoid Delays in Processing Refunds and Correcting Errors

Where’s My Money? 3 Ways to Avoid Delays in Processing Refunds and Correcting Errors

Anyone who’s worked retail has likely made a mistake while charging a credit card. This can create a headache for customers, staff, and management. For most people the first reaction is to simply void the transaction and start over. The problem with this approach is you’re usually left with the customer asking why they were charged twice, asking for a refund and having to explain that “They’re just holds, the voided one will fall off in 3-5 business days.” While this may be true, the customer is left frustrated, and you are left without options. In this post, in addition to explaining the void we want to talk about what your options are, when they should be used and why.

1. Void

When I worked my first retail job, I was trained that if I messed up a transaction, I should void it and do it again. It’s a way to quickly clean up an otherwise costly mistake, but what is it? To start we need to explain the main components of a credit/debit sale. The first is the Authorization, when the card is ran, an authorization request is sent to the cardholder’s bank or credit card company to verify the funds are available. If the authorization comes back approved the funds are placed on hold in the customer’s account, a receipt prints, and for the cashier and the customer, the transaction is complete. But for the banks, the transaction isn’t finished. The terminal stores the transaction and (usually) at the end of the day completes a batch settlement. When a transaction is settled is when the funds are “captured” meaning a request to transfer the funds is sent to the cardholder’s bank.

When you process a void, the authorization sits with the cardholder’s bank, untouched, but the transaction is cleared from the terminal, so the funds are never captured, meaning no money has left the cardholder’s account and the hold will drop off the account. Usually in 3-5 business days. This is great if you just need to process a quick correction, but sometimes multiple holds on an account can pose a problem. Especially when those transaction amounts are high. While the money hasn’t left the account, the bank has placed it in reserve for a pending authorization, and says the customer can’t use it for other things until the hold falls off. If this is a problem, the cardholder can call their bank, have the bank verify with the business that the transaction was voided, and the hold will be released. I’m sure right now you’re thinking, “There has to be a better way.” And there is.

Pros: Quick and Easy, all terminals and online gateways are capable of voiding transactions

Cons: Funds are held until bank removes the hold (3-5 business days), only works on same day transactions (before batch/settlement) *DOES NOT WORK FOR PIN DEBIT TRANSACTIONS

*Problem with voiding Pin Debit: Pin Debit authorizations don’t work in the same was as a credit card. When a pin debit authorization is received by the bank, the funds will transfer, even when voided. If the transaction has been voided from the terminal, the merchant’s processing bank loses the routing information on the transaction, and often the amount, while removed from the customers bank account, ends up in a financial limbo of sorts. The funds are kept by the bank until the transaction can be corrected and routed to the merchant’s bank account. This process, in our experience, can take 3-4 weeks. To avoid this, for Pin Debit, you have to Reverse or Refund the transaction. This same process can occur on a Pin Debit chip transaction when a customer has entered their Pin, then removes their card before the transaction is complete, as the authorization has already been sent, but the transaction is interrupted in the terminal, causing the terminal to void the transaction. If this happens, call your processor and ask for them to initiate an inquiry.

2. Reversal

Whereas a void just wipes the transaction from the terminal, a Reversal works like an Authorization in reverse. When processing a reversal, in addition to clearing it from the terminal, it also sends a notification to the cardholder’s bank to release the held funds. In a partial reversal, only part of the hold is released and the transaction is processed at the new amount. This avoids multiple authorizations, and the customer having to wait for their money to be released, or going through the hassle of calling their bank to release the held funds. The disadvantage to a reversal in that, like a void, it must be completed prior to the batch settlement. In the event that funds need to be returned after the batch settles, really the only option is to refund. In terms of correcting errors, reversals are generally the best option.

Reversal for Pin Debit – With a Pin Debit transaction you cannot void the transaction, as it doesn’t work in the same way. For same day transactions (before batch/settlement) you will need to process the transaction as a Reversal. If your terminal is not capable of processing a reversal, you may need to process the correction as a refund. In this case, consult your Merchant Services Provider to see what your options are.

Pros: Quick and easy, funds are released in the customer’s bank account

Cons: Not all terminals support reversal capability, must be processed same day (before batch/settlement)


3. Refund

When a transaction has already been captured, the only option the merchant has is to refund the amount to the card. A refund works like a transaction in reverse. The card is swiped or keyed in, and a refund is created in the terminal to transfer funds to the cardholder’s account. Just like an Authorization, the capture of a refund isn’t processed until the terminal batches out. From the time the capture is processed, it can take 3-5 business days for the funds to appear in the cardholder’s account.

Pros: reliable way to return funds to customer

Cons: Funds can take 3-5 business days to hit the customers account

If you have questions, or would like a free review of your existing merchant account contact us by email at info@agapay.gives or by phone at (800) 644-3909.


How to Dispute Fraud on Business Visa Debit Cards

How to Dispute Fraud on Business Visa Debit Cards

One of our clients called us with an interesting question regarding disputing a fraudulent transaction on their Business Debit Card. As part of our weekly newsletter series, we asked one of our staff members to research it and explain it in a way that mostly everyone could understand.

 Here are the facts: 

  • They ran the transaction as a non-pin or “credit” transaction
  • Their card is a Business Debit Card endorsed by Visa
  • The merchant charged the business an erroneous fee on the transaction

When the business contacted their bank, the bank told them that business cards aren’t covered by “Regulation E” so there is nothing that can be done. Not willing to accept that answer, they contacted us to see if we could provide any insight. Based on our research, we were able to provide some clarity and understanding to help the business work with their bank to correct the issue. 

What we learned is that there are three primary regulatory bodies that govern what happens in the event of fraud.
1. Consumer Financial Protection Bureau (U.S. Government)
2. Card Brands (Visa, MasterCard, Discover, American Express, etc.)
3. The Cardholders Bank/Issuer 

In Regulation E (Electronic Funds Transfer Act) the Consumer Financial Protection Bureau (CFPB) outlines the regulations on liability held on “consumer” accounts, but doesn’t mention business. Which in the industry is interpreted to mean business accounts are excluded. 

The next regulatory body, Visa in this case, maintains a zero liability policy for fraud on business check cards but provides exclusions for transactions alleged to be performed by:
• A Business co-owner
• The Cardholder or person authorized by the Cardholder
• Any other person with an interest in or authority to transact business on the account 

Since the erroneous fee was not intentionally incurred by the cardholder, it would be safe to assume the disputed portion of the transaction wasn’t performed by the cardholder. 

From the bank’s perspective, they are claiming exemption based on Regulation E, however they still maintain responsibility under the Limitation of Cardholder Liability clause of the Visa International Operating Regulations. 

The conclusion, under the Visa operating regulations, the bank has a responsibility to verify the fraud and limit the liability to the business, unless it can verify that the transaction falls under an exempt category. We’ve instructed the business to try and reach out to their bank again, with their new knowledge of Visa operating guidelines, and see if they can get it resolved. 

For a more detailed explanation or to answer any questions that you have, please feel free to contact us at info@agapay.gives 

Best Regards, 

The Agapay Team

How to Dispute Credit Card Transactions

How to Dispute Credit Card Transactions

As a merchant, it’s possible that you’ll see a credit card dispute at some point in your business. Many businesses for one reason or another have already experienced a customer disputing a charge and have had to deal with a “Chargeback”. This week, however, we wanted to address the issue of what happens when you, as the cardholder, see an error or an unauthorized charge on your own credit card.

The major card brands such as Visa, MasterCard and Discover all have established, published guidelines as to what protections are afforded to cardholders. Generally speaking, the cardholder holds zero liability in the instance of fraud, misrepresentation or error.

In the event that you see an error (The amount is different than what you agreed upon or different than your receipt, an accidental double charge, etc.) it is generally recommended that you contact the merchant directly to try and resolve the issue. If the issue isn’t resolved, or if you do not want to contact the merchant, you can contact your card issuer (your bank or credit card issuer) and they have an obligation to investigate the issue by creating either a “retrieval” or a “chargeback”. The merchant will then be given an opportunity to dispute your claim and based on the information received within the allotted time the issuer will make a determination. Generally speaking, excepting gross negligence or fraud on the part of the cardholder, the issuer will rule in the best interest of the cardholder.

Unauthorized Charges/ Lost or Stolen Credit Cards
If you lose your credit card, believe it has been stolen or see a charge that you did not authorize, contact your card issuer immediately. This is usually the result of identity theft in one form or another. The process of reporting can take a while, so be prepared to answer a lot of questions. They will try to determine if there was any negligence on the part of the cardholder, and try to identify, if possible, when and how any fraudulent transactions occurred. They will then go through your recent transaction history and try to find if there are any other unauthorized transactions. While the questions and method may seem as if they are accusing you, stay calm, answer honestly and provide any supporting data that you can. Their main job is to establish that fraud has occurred, once that’s established, their job is to protect the cardholder.

While hopefully you don’t experience credit card fraud personally, having an understanding of your rights and how to handle fraud when it occurs can help significantly when it happens.

If you have questions on how these disputes work on the merchant side, give us a call at 1-800-644-3909 or email us at info@agapay.gives.


The Agapay Team

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