Refunds and Reversals - What's the difference?

Introduction

Refunds and reversals both mean money is going back to the cardholder, but when and how they happen is quite different in credit card processing.

Refunds

The merchant refunds the full captured amount or a part of the captured amount after processing.

Here are the main reasons for refunding a transaction after it has been settled:

• Unmet expectations: The product or service did not meet the customer’s expectations.
• Damaged or defective products: The product received by the customer was damaged or defective.
• Incorrect product: The product wasn’t what the customer expected due to bad descriptions or shady selling.
• Incorrect amount charged: The wrong amount was charged.
• Duplicate transaction: The transaction was duplicate.
• Product unavailability: The item ended up being sold out.
• Change of mind: The customer changed their mind after ordering.

Reversals

The merchant voids the entire open amount of a pre-authorization. Depending on the payment method, the pre-authorization expires usually after a couple of days unless it is already captured or cancelled.

Here are the main reasons for cancelling a pre-authorized payment before it is settled:

• Duplicate transactions: Errors in payment or delivery information, or delays in finalizing the purchase.
• Customer change of mind: The customer decides to cancel the transaction.
• Product unavailability: The purchased product or service becomes unavailable.

There are two processes available when issuing a Refund or a Reversal: 

1. Manually from within our Payment Gateway - Select the transaction and then refund
2. Via our API. See Refunds and Reversals