Understand payment, charge, and refund processing states

When you use make a charge or refund, the payments follow a specific sequence. We assign a “state” during each step of the process.

Here’s a brief overview of charge and refund states for credit cards and eChecks. Design your app so it can handle changes to payment states.

These states apply to credit card charges and refunds.

Successful credit card charges start in the authorized state. Charges become captured following further authorization. Once the money is in the seller’s (i.e. merchant) bank account, the charge becomes settled.

If a charge isn’t authorized, its state becomes declined.

If a charge is captured but then canceled, its state becomes cancelled.

• Authorized: The payment is in the first part of the two-step authorization and capture process. At this point, the buyer’s (i.e. card holder) credit card issuing bank has authorized their ability to pay for the transaction. This ensures the credit card is in good standing and has sufficient funds.
• Captured: The payment is in the second part of the two-step authorization and capture process.
• Settled: The payment was successfully funded. The money moved to the seller’s (i.e. merchant’s) bank account. At this point, the charge is complete.
• Refunded: The money successfully transferred back to the buyer (i.e. card holder).
• Declined: The payment wasn’t successful. The credit card was declined/not authorized by the issuing bank, rejected by the payment transaction service (PTS), or returned by the process.
• Cancelled: The payment was cancelled.

Successful credit card refunds start in the issued state. Once the money moves back to the customer’s (i.e. card holder) bank account, the refund becomes settled.

• Issued: The refund started but isn’t complete.
• Settled: The payment was successfully funded. The money moved to the buyer’s (i.e. card holder) bank account. At this point, the refund is complete.
• Declined: The refund wasn’t successful.

These states apply to credit card charges and refunds.

Successful eCheck charges start in the pending state. Once the ACH network accepts the eCheck and the money moves to the seller’s (i.e. merchant) bank account, the charge becomes succeeded.

From a pending state, eChecks can also become declined or voided. Declines are caused by processing issues. Voids are intentional cancellations.

• Pending: The eCheck was submitted to the ACH network. It’s waiting for approval.
• Succeeded: The ACH network accepted the eCheck. The money for the eCheck moved from the check writer’s account to the seller’s (i.e. merchant) bank account. At this point, the charge is complete.
• Refunded: The money successfully transferred back to the check writer’s account.
• Declined: The charge wasn’t successful. The ACH network rejected it. The money didn’t move from the check writer’s account.
• Voided: The payment was stopped.

Successful eCheck refunds start in the pending state. If the refund is approved and the money moves back to the check writer’s account, the refund becomes succeeded.

• Pending: The refund was submitted to the ACH network and is waiting for approval.
• Succeeded: The refund was accepted by the ACH network. The money moved back to the check writer’s account.
• Declined: The refund wasn’t successful. The ACH network rejected it. The money didn’t move.