Understand Refunds and Failures

Credit card or ACH refund transactions can fail for reasons like the card expiring since original transaction, the account closing, insufficient merchant fund, technical issues and more. This guide explains how to monitor and correct failed refunds.

ACH refunds and card refunds are handled differently, because of differences in how processing works between the two.

​

ACH refunds

Here’s what you need to know about ACH refunds:

• For ACH transactions the terms “void” and “refund” don’t have separate meaning. When an ACH transaction is voided, it’s just like refunding the transaction.
• You can refund an ACH transaction once.
• The ACH refund works only when there is a record of the original transaction with Payabli. If a merchant has moved from a different service provider to Payabli and is trying to refund a transaction that was processed by their former provider, the refund won’t work because Payabli didn’t process the original ACH transaction.
• When an ACH refund failure occurs, the failure appears later, as an ACH Return.
• If an ACH refund fails, you aren’t alerted immediately. Because of how ACH processing works, the failure appears later, as an ACH return.

When an ACH refund fails, here are the steps you should take:

1. First, check to make sure the ACH refund was properly initiated for the intended original transaction. You can’t refund an ACH transaction that was already refunded, or was processed by a provider other than Payabli.
2. If the refund was properly initiated but resulted in an ACH return, then the merchant must work with the customer to pay them by some other means. For example, issuing store credit, cash, or a check.

​

ACH returns and refunds

When an ACH transaction is voided or refunded, it initiates two separate processes:

• The original debit attempt to the payor’s account.
• A credit (refund) action to reverse the original transaction.

Since these processes operate independently, you may encounter a scenario where the original debit fails and returns while the credit (void/refund) succeeds. This can result in the payor having excess funds in their account since the credit went through but the original debit failed. In this case, you would need to:

1. Process a new debit to recoup the excess funds from the successful refund.
2. Process another debit for the original payment amount.

To prevent this situation, we recommend that you wait for the original ACH transaction to clear, typically 3 business days, before initiating a refund.

​

Card refunds

Here’s what you need to know about card refunds:

• In card processing, “void” and “refund” have different meanings. You can void a transaction only if the batch hasn’t closed and started the settlement process. You can refund a transaction only after the transaction has started the settlement process.
• A transaction can be voided or refunded once.
• Each card brand has its own rules that dictate how long after a transaction a refund can be processed. Typically, refunds are allowed within a window of 3 to 4 months from the original transaction date.
• The card refund works only when there is a record of the original transaction with Payabli. If a merchant has moved from a different service provider to Payabli and is trying to refund a transaction that was processed by their former provider, the refund won’t work because Payabli didn’t process the original card transaction.
• When done correctly, card refunds seldom fail because:
  • Even if the card is expired or lost, the card issuer redirects the funds to the new replacement card.
  • If the card account is closed, card issuers redirect the funds to a bank account if a banking relationship exists with the cardholder.
  • If those options fail, some card issuers still accept the refund, and then issue a check to the cardholder.
  • In each of these situations, merchants still get a Success response when refunding the transaction through Payabli.
• In the rare circumstance that a card refund fails, the payment response (whether via the API or web apps) itself contain the failure, so you are notified of the failure immediately.

When a card refund fails, here are the steps you should take:

1. First, check to make sure the card refund was properly initiated for the intended original transaction. Remember that you can’t:
   • Refund a card transaction that was already refunded
   • Refund a transaction processed by a provider other than Payabli
   • Refund a transaction that hasn’t started the settlement process yet (you can still void transactions before the batch closes)
2. If the refund was properly initiated but resulted in a failure, then the merchant must work with the customer to pay them by some other means. For example, issuing store credit, cash, or a check.