You may have faced a situation where the transaction you posted is returned unsuccessfully. Regardless of the issue, why your transaction is failed, you are compelled to request the money back. Your money will be returned through a refund or reversal in such a dispute.

Many people intermingle the terms’ refund and reversal transaction about transactions. Let’s talk about the difference between refund and reversal transactions. I will try to explain it in as simple words as possible to comprehend the concept easily.

What is The Difference Between Refund and Reversal Transactions?

The main difference between refund and reversal transactions is that the process of refund money has been posted to the merchant account because the transaction is considered complete while the reversal transaction is not yet posted. The merchant has not received the money.

To further explain the topic, let’s clarify the terms to configure the difference easily.

What is a Refund?

First, let’s talk about a refund, and then we will move to what is a reversal transaction. You must have heard the term refund in the world of transactions. A refund means getting money back when you return something you bought. For example, if you request your money back from a merchant or seller because you are not happy or satisfied with the product or, in some cases, think the transaction is not worth it.

Note that, in a refund, the merchant has received the payment, or your transaction has been posted successfully. However, if the customer feels like the product or the service does not match his needs or is not in good condition, a request for a refund can be made.

If you or anyone is facing a situation, contacting your bank would be of no use. You can, however, contact the merchant. The process will not be a piece of cake for the customers. Even if the merchant agrees to refund, he will ask for a valid reason and will try to get as much evidence as anyone can.

A refund may harm the business profit projections, so it’s not a good thing from a business perspective. Therefore, businesses must ensure that their product is not of inferior quality and satisfies the customer’s need to keep the refund risk a bit close.

Other things being equal, the funds will be refunded to the customer. This is the main difference between refund and reversal transactions. If the merchant has to refund the transaction, he is at a loss because the specific order has been counted and the funds required to make a purchase have been transferred to his account.

That is why many merchants do not have a refund policy, as it can be painful for the merchant, and many merchants don’t have a refund policy. I will never shop from a store that does not allow a refund.

In a refund, your money is always returned from the method used to make the purchase or transaction. For instance, if you purchase using a credit card, the funds will be credited back to the same card. If you use a debit card, the funds will be deposited into the bank account associated with your debit card.

Let’s say you ordered a game from Amazon and paid for it through your card. You are eagerly waiting for the delivery, but you find a product not of good quality or the game is defective upon delivery. Now, what to do? Amazon has a refund policy. The next step you will take is to request a refund for the product.

In this case, you should contact the seller as soon as possible and request a refund. Are you getting the point of this conversation? Contacting the merchant will help you in case of refund reversal. Conversely, you have to contact both merchants and your bank in a reversal transaction.

How Long Does the Refund Take

Typically, you will be refunded in 10 days, but it may take up to 20 days, depending on the merchant policy of refund. It is better to be aware of all the terms and conditions of a refund to avoid being stunned if the merchant tells you some new information.

You need to remember that the difference between a refund and a reversal transaction is the transaction is completed in a refund while it is not in the case of a reversal transaction. Moreover, in a refund, you have to contact the merchant only, while in a reversal transaction, you need to contact both the bank and merchant.

Although the terms look synonym, you will be surprised to find that they are not. I have explained the term refund now; you may be curious to know more about reversal transactions. Let’s proceed further on the topic and find out what is a reversal transaction.

What is a Reversal Transaction?

A reversal transaction is not that complicated as compared to a refund. It is made before the transaction is posted. In simple words, it is the process in which the transaction is initiated but could not make it to completion due to initiated cancellation by either a customer or a merchant.

Here we are talking about authorization reversal. If you make a transaction and quickly request a bank to cancel, it is a reversal transaction. The process needs to be done after you make a transaction to prevent completing a transaction.

If you are wondering, can a transaction be reversed? Yes, it can be. Nevertheless, it happens when there is a mistake in the payee’s account information. Money that is paid will be returned immediately to the payee’s account.

Now see the difference in the refund process. The money has been entered in the merchant or seller account, while in the reversal transaction, it is yet to enter the merchant account. In reversal, you need to contact your merchant to reverse the transaction you made.

Have you faced a situation where the payment is not successfully made, but you got debited? For example, you shop from a store and pay through your debit card. The merchant told you that the transaction was unsuccessful, and you made it again. This time it works! But you received a message of payment from your bank twice. Contact your bank and ask them to cancel or reverse the extra transaction you made. Within a day or 32 hours, money will be changed back to your account.

The bank automatically reverses unsuccessful payments in some cases if the merchant or seller does not receive the payments.

How Long Does a Reversal Transaction Take?

It takes a maximum of three days to reverse the transaction. This is another difference to note between refund and reversal transactions. That happens because the other party involved has not received the payment yet, and the payer will get the money a lot faster than in a refund.

The essential common reason for the reversal transaction is

  • The product is out of stock.
  • The customer wants to pledge fraud.
  • The customer changes their mind after ordering a particular order.
  • The product is not advertised, or the quality cannot satisfy customer needs.
  • The customer was charged wrongly or twice.
  • The customer sends a payment to the wrong account.

To cancel the reversal transaction, you must contact your bank in no time so they can assist you. You can also contact the merchant and ask whether they receive the money or not and tell them why you are thinking about a reversal transaction.

Also Read: Credit Card Pending Transaction Disappeared

Let’s explain the reversal transaction with an example before summing up the difference between refund and reversal transaction. Anthony ordered a phone and waited for a product to arrive. He received a mail from the seller informing him that the model he tried to order was out of stock and the money had been sent back to his account. He noticed that the pending charge from his account drop-off and payment, which was required to make a purchase and showing under a pending label, is now part of his available balance. In this case, the bank automatically reverses the pending transaction.

Who Initiated The Refund or Reversal Transaction?

The client, the merchant, or the card issuer can initiate a refund or reversal. Refund, however, is usually initiated by the client when they find a product defective or whatever the reason may be.

A reversal transaction is initiated by a merchant or the seller for the aforementioned reasons, e.g., if the product is not available in stock.

Let’s Sum Up The Difference Between Refund and Reversal Transactions.

  1. In a reversal transaction, it usually takes three days to reverse money back to the customer or the originated account. While refunds take two weeks or, in some cases 20 days, refund money back to the customer
  2. In a refund, the transaction is completed, and the amount has been paid to the merchant or seller account. On the other hand, the transaction is not finished yet, and the merchant has still not received the money.
  3. The customer does not have to contact the bank but the merchant or seller for a refund. In reversal customer first has to contact the seller or merchant to find out whether the transaction is posted or not. If not, contact the bank to ask them to reverse the transaction.

 You should be clear that refund and reversal are not the same transactions. Moreover, what is the difference between refund and reversal transactions? Let’s move to the frequently asked questions about the topic.


List of Commonly Asked Questions and Answers on a Website About Topics “Difference Between Refund And Reversal Transaction”

Q1. What Does Reversal Mean On a Credit Card Machine?

It is the process by which funds or money are returned to the payer’s account. In case the payment was not successful, this, in turn, will make the payer request to cancel or reverse the transaction.

Q2. Can a Bank Reverse The Payment?

Yes, A bank can reverse the payment if the customer requests that a transaction be canceled immediately, and money be reversed. However, the bank cannot assist you much once the transaction is posted and the merchant has received the payment. You will have to contact the merchant and request a refund in such a case.

Q2.Can a Merchant Reverse a Refund?

Merchant cannot reverse the refund once it is made. The only thing is to charge the customer’s credit or debit card. If the merchant makes any mistake, he can contact the customer and pay the funds back to the account.

Q3.How Long Does it Take to Reverse a Debit Card Transaction?

It takes a maximum of three days to reverse a debit card transaction. While in case of refund, every merchant has its policy of the merchant. Some do not allow for a refund. Usually, it takes three weeks to refund the money for a product you want to return.