Order Refund Frequently Asked Questions

 

1. Refund Process

Refunds are typically processed within 3-5 business days once issued, subject to the payment processor and the customer's bank.

  • Customer Cancellation:

    • If the item has not shipped: A full refund will be issued. If the payment was only authorized, the authorization hold will be released, ensuring no charge is made.
    • If the item has shipped: A 5% charge will be applied to cover processing and restocking fees. The remainder of the payment will be refunded.

  • Merchant Cancellation:

    • If the merchant cancels the order (e.g., due to stock issues or system errors), a full refund will be issued to the customer. The refund procedure depends on whether the funds were captured or merely authorized:
      • If the funds were authorized only, the authorization will be released, and the customer will not be charged.
      • If the funds were captured, the merchant will initiate a refund to the customer.

  • Refund for Uncaptured Funds:

    • If the funds were not captured by the merchant (e.g., the authorization was not processed or the transaction was canceled), the refund process involves releasing the authorization hold, making the funds available to the customer.

  • Refund for Captured Funds:

    • If the funds were captured, the customer is entitled to a refund according to the store’s policy. If the item has not shipped, a full refund will be issued. If the item has shipped, a 5% charge will be applied to cover associated fees.

  • Back-Order Policy for Special Items:

    • In the case of a back-order on special items, the merchant will provide the customer with the estimated arrival date.
      • If the customer chooses not to wait, a full refund will be issued.
      • If the customer decides to proceed with the order and later requests a refund, a 20% charge will be applied due to the custom nature of the made-to-order item.

2. What is Authorization?

Authorization is the initial step in a credit card transaction, where the payment processor or bank verifies:

  • The validity of the credit card (ensuring the account exists and card details are correct).
  • Whether the customer has sufficient funds or available credit to cover the transaction.
  • That there are no issues (such as fraud alerts or frozen accounts) that could impede processing.

Once authorized, the bank places a temporary hold on the funds in the customer's account. This ensures the money is reserved but has not yet been transferred to the merchant.

Refunds and Authorization:

If the customer cancels an order before shipment and the payment has only been authorized, the refund process involves the release of the authorization hold, making the funds available again to the customer without any charge.

3. The Difference Between Authorization and Capture

  • Authorization: This step verifies the transaction details and ensures the customer has sufficient credit, but no funds are transferred. Instead, a temporary hold is placed on the amount to ensure availability.

    • Example: If a $100 payment is authorized, the card issuer places a temporary hold on $100 in the customer’s account, making it unavailable for other transactions. However, the money is not deducted or transferred to the merchant.

  • Capture: This is the next step, in which the merchant requests the payment to be processed and transferred from the customer’s account to the merchant’s account.

    • If the merchant successfully captures the authorized amount, the funds are transferred to the merchant, and the customer’s account is debited.
    • If the authorization is not captured (e.g., the merchant does not submit the capture request, or the transaction is canceled), the authorization hold is released, and the funds are made available again to the customer.

Refunds and Capture:

If the merchant has captured the funds and the customer requests a refund:

  • If the item has not shipped, a full refund will be issued.
  • If the item has shipped, a 5% charge will be applied to the refund amount.

4. Why Authorization Doesn’t Capture Money

  • Temporary Hold: Authorization is a hold or reservation, not an actual transfer of funds. The hold lasts for a limited period (typically 3-7 days). If the merchant does not submit the capture request within that time frame, the hold is released, and the customer’s funds are no longer reserved.

  • Merchant’s Discretion: The merchant has the option to capture the authorization or not. For example, in the case of pre-orders, hotel bookings, or rental services, the merchant may authorize the payment to ensure funds are available, but may not capture the payment until the goods or services are provided.

  • Time Limits: Authorization holds are only valid for a short period. After this time, if the transaction is not captured, the funds are released and made available again to the customer.

Refunds and Authorization:

If the merchant does not capture the funds (i.e., the authorization was never processed), the refund is the release of the authorization hold. As no money has been transferred, the customer’s funds are returned by lifting the hold.

Summary

  • Authorization: Validates the transaction and temporarily holds the funds, but does not move any money.
  • Capture: The merchant processes the transaction and transfers the funds from the customer’s account to the merchant’s account.
  • Refund Process: If the transaction was not captured, the refund involves releasing the authorization hold. If the transaction was captured, the funds are refunded according to the store’s refund policy (e.g., full refund or partial charge depending on shipment status). Refunds typically take 3-5 business days to complete once issued.
  • Back-Order Policy for Special Items: If a customer places an order for a special item on back-order, the merchant will inform the customer of the estimated arrival date. If the customer cancels, a full refund is issued. If the customer proceeds and later requests a refund, a 20% charge applies due to the custom, made-to-order nature of the item.