Technical
Refund
Definition
Refund returning funds to a cardholder for a previously captured/settled transaction. Refunds create a new credit transaction. Original interchange may not be refunded depending on network rules and timing. Some acquirers charge per-refund fees. High refund rates can trigger acquirer scrutiny. Refund instead of void when transaction has already settled.
Related Terms
Void
Cancelling an authorized but not yet captured transaction. Voids release the authorization hold immediately and incur no interchange (in most cases). Must be processed before batch settlement. After settlement, the merchant must process a refund instead. Voids are the cleanest way to cancel a transaction that shouldn't proceed.
Chargeback
A transaction reversal initiated by the cardholder's bank after a dispute. Chargebacks return funds to the cardholder and impose fees on the merchant (typically $25-100). Common reasons include fraud, non-delivery, product issues, and billing disputes. Excessive chargebacks trigger monitoring programs and can result in account termination. Prevention is always cheaper than fighting chargebacks.
Settlement
The process of transferring funds from captured transactions to the merchant's bank account. Settlement typically occurs in batches (daily or weekly). Timing varies by acquirer and merchant agreement - next day, T+2, or weekly. Net settlement deducts fees and chargebacks from gross volume. Faster settlement improves cash flow but may come with higher costs.
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