In the dynamic world of subscriptions, managing payments effectively is key to customer satisfaction and financial success. Two terms that often come into play are void transactions and refunds.

A void payment is a cancellation of an authorized but not settled payment, typically used for correcting mistakes or for canceling pending charges. A refund is a reversal of a settled transaction used when a customer wants a reimbursement.

One of the most common questions our support team gets asked is: when should I void a payment, and when should I refund it? Through this article, we'll explore the differences between these two concepts and when to use them.

Void transaction vs. refund: What’s the difference?

The difference between a void and a refund is whether or not a transaction has been settled. An unsettled transaction can be voided—stopping the transaction from processing and removing it from the customer’s account. Once a payment has been settled it can only be refunded, and a partial refund can only be made to a settled transaction.

A voided transaction will typically disappear from a customer’s credit/debit account statement within 24 hours, while a refund may take three to five business days to appear on a customer’s credit/debit account statement.

When to use void transactions

Void payments come in handy in the following scenarios:

  • Mistaken transactions: When a transaction is processed erroneously, voiding it will prevent the charge from appearing on your customer's statement.

  • Pending charges: When transactions haven't settled yet, voiding is the preferred method to cancel them without impacting your customer's financial statement.

  • Testing and authorization: When authorizing a specific amount–common with pre-authorization for hotels or rental cars–voids can release the blocked funds, allowing the customer to use their balance.

When to use refunds

Refunds are suitable for scenarios involving actual purchases:

  • Product returns: When a customer returns a product or cancels a service and is entitled to a reimbursement, a refund transaction credits the money back to their account.

  • Unsatisfied customers: When a consumer is unhappy with a product or service, a refund can retain their trust and satisfaction.

  • Billing disputes: When a customer disputes a charge or raises a billing issue, processing a refund can be a way to resolve the situation amicably.

Understanding the difference between void payments and refunds, as well as when to use each, is critical to building customer trust and keeping financial stability. 

It’s important to note that managing these transactions at scale can become challenging. Several subscription brands rely on a subscription billing platform to streamline these processes, ensure accuracy, and improve customer satisfaction. 

How Recurly helps you manage transactions easily

Because Recurly strives to simplify billing, you need not worry. We’ll automatically handle the transaction in the most appropriate manner–allowing you to improve:

  • Transaction tracking: Maintain a detailed transaction history that makes it easy to track and manage voids and refunds, especially useful for subscription-based businesses with high transaction volumes.

  • Customer convenience: Deliver a user-friendly experience for your customers when requesting refunds and processing them seamlessly.

  • Financial transparency: Get clear visibility into financial transactions to stay transparent and compliant.

Want to learn more? Check out our recurring billing solutions for subscription businesses.