Credit card voids seem useless

When you use your credit card online, the transaction is a 2-step process. First, the merchant authorises your card for the transaction amount. This places a hold on the funds, lowering your account’s “available balance.” The money’s still there; you just can’t access it. The merchant must then “settle” the transaction, to indicate that they really do intend to collect the funds. Later that day, the funds from the settled transaction will be transferred from your account to the merchant’s. This process of authorisation followed by settlement allows the merchant to change their mind about charging you.

They can do so by “voiding” the transaction. A void is supposed to let your bank know they can lift the hold on the funds. If a merchant authorises a transaction but never settles or voids it, the hold will eventually fall off by itself, but it might take months.

Unfortunately, voids don’t seem to work much of the time. In our experience, many card issuers don’t in fact lift the hold on funds after receiving notice of a void, opting instead to wait until the end of the hold period. In the case of CIBC FirstCaribbean, for instance, that period is 38 days.

This leads to angry customers. If you order on Hopscotch, we’ll authorise your card for the appropriate amount, but we won’t settle the transaction until we actually collect your order. If you cancel before then, we’ll void the transaction. But you won’t be able to use those funds until your bank lifts the authorisation hold, which may take weeks. You may then contact us, surprised that we’ve “charged” your card, and ask us to “refund” you. We’ll then have to explain that, in fact, we haven’t taken any money from your account. It happens all the time.

I don’t have a good solution to this problem. We’ve written letters to customers’ banks about voided transactions, asking for holds to be lifted. This may shorten the hold period, but it’s a manual process we’d rather avoid. In any case, by this point, the customer is already upset with us. It may also be possible to avoid voids altogether, by settling transactions immediately and issuing refunds as necessary. But a refund is only possible once the merchant actually has the funds, so it usually can’t be initiated until the following business day. This too would be manual.

For now, I think we’ll simply explain the whole process more clearly in the email we send to customers if we cancel their order. This isn’t ideal, but at least it lets them know who’s at fault.