Issuing Credit Card Refunds: Visa Policies Explained

As a merchant, you are responsible for making sure your customers either receive the goods and services they paid for, OR receive their money back. Issuing prompt refunds isn’t only morally responsible, but it’s also a proven tactic to reduce jeopardizing your merchant account with frequent chargebacks.

Occasionally we have merchants inquire about how to issue a refund when a customer’s card or bank account has been cancelled or closed. Coronavirus restrictions have forced many businesses into being unable to deliver services or goods making this an increasing issue. Record numbers of refund requests have bombarded high risk industries such as travel.

Policies vary by network and card issuing bank creating a complicated system. However we wanted to do a deep dive into Visa’s policies on refunds to clarify your responsibility as a merchant. We know this can be an extremely frustrating experience for you as a business owner, and often you’re dealing with a frustrated customer. Hopefully, this post will also help you explain to customers how their refunds will be issued, and why.

In 2011, Visa’s policies stated that no cash or check refunds are allowed. However in 2021, Visa requires merchants to issue refunds using alternative methods if the attempt at refunding to the card is denied. This may seem like common sense, but it’s always good to be aware of Visa and other network’s current policies.

Why can’t I simply hit “refund” credit card and send the money back? 

Ideally, you would void a transaction as soon as possible instead of refunding a customer (learn the difference HERE), but when voids aren’t possible, refunds work well.

Merchants may have a hard time refunding a customer for two reasons:

  1. You, the merchant, tries to issue a refund, but your customer has cancelled their debit or credit card. 
  2. You, the merchant, tries to issue a refund, but your customer has closed their bank account.

In the first scenario, the gateway will decline the refund and you will still have the money your customer paid. In this situation, you are responsible for getting the funds to the customer. In the second scenario, the gateway accepts the refund on your end, but it is held up in the transaction process, not delivered to your customer. Both situations can be extremely frustrating, but we can help! Follow the following troubleshooting tips…

I’m getting an error message when I try to issue a credit card refund to a customer or client.

Did you get an error message while trying to issue a refund? Time to troubleshoot! Here are a few issues that may be holding up your customer’s refund:

  1. Multiple transactions? Visa recently changed their guidelines to require that merchants only issue one refund of the same amount in a 24-hour period. Try issuing the refunds at least 24 hours apart.
  2. Too soon? Sometimes the original transaction must be settled with the processor before you can issue a refund. Try waiting a full 48 hours and try again.
  3. Too long? Credit card processors require that refunds are issued within a certain time period. This time varies by processor, but is typically between 12-18 months from when the original purchase was made. If you would still like to issue a refund after this time period, you’ll need to use an alternative method.
  4. In person? Certain cards and POS systems require a card to be in person to issue a refund.
  5. Changes to purchase details? Details such as the sales location cannot be made after the sale is completed. To complete the return, change the details back to the original purchase details.
  6. Different card? Some gateways and POS systems require that a refund be made to the same purchase card.
  7. New merchant account? If you’ve obtained a new merchant account, you won’t be able to process a refund on a transaction that was made using the old account. You’ll need to use an alternative refund method.

I’ve tried to troubleshoot… How do I issue a refund if the card is declined or cancelled? 

If one of the above mentioned tactics still doesn’t work, there’s a high chance your customer or client’s card has been cancelled. Make sure to always monitor your bank account and processing dashboard for any refunds that may bounce back. In an ideal world, your customer notifies you of the cancelled card and you discuss alternative methods of payment. Unfortunately this isn’t always the case. Ultimately, you, the merchant, are responsible for ensuring your customer receives their refund.

You have a few alternative refund options:

  1. Store credit (typically this needs to be in your terms and conditions that your customer is aware of and agrees to upon purchase)
  2. Cash
  3. Check
  4. Different credit card (this option may be restricted by certain systems or processors)

Remind your customer if they simply cancelled a card because of perceived fraud, then the amount will simply be refunded to their new card number since the account details are the same.

I issued a refund, but my customer never received it? 

A customer may not have received their refund yet for several reasons…

  1. The customer closed their bank account and the money is held at the issuing bank level. This can be frustrating for your customer because they’re hoping to get their money back directly from you. However, in this case, you’ve already issued a refund and no longer have the money. Your customer will have to contact the issuing bank to receive their funds. Alternative payment methods from that issuing bank may include cash, check or direct deposit.
  2. The customer’s credit card company accepted the refund, but applied it toward an outstanding balance on the customer’s credit card.
  3. The funds are being “held” even though you issued a refund. Your customer just needs to be patient.

Encourage your customer to contact their credit card company’s customer service via email or phone. The representatives will be able to update them on the status of the refund if the customer explains the situation. It may be helpful to give the customer the Acquirer Reference Number of the transaction so that the issuing bank can easily locate the transaction. Remind them that the issuing bank will likely require paperwork to complete the transfer, but that the credit card company is legally required to issue a check for the amount due.

Why is my customer’s refund taking so long? 

The amount of time it takes to issue a credit card refund varies by network and processing company. Sometimes the refund will be issued immediately, other times companies wait until the end of the billing cycle. Typically if a customer has not received their refund in 30 days, they should contact customer service.

For more information please check out the following resources:


If you have any specific questions regarding refunds or other processing information, don’t hesitate to reach out to your account manager at Durango Merchant Services! We’re always happy to help and answer any questions you may have!

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