Refund
Also known as: Card refund, Credit transaction
A refund is money a merchant sends back to a customer's card for a payment already made. It is a new transaction in the opposite direction, started by the merchant, not the reversal of the original payment.
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Example
A customer returns a €60 jacket. The merchant issues a €60 refund. The customer sees a credit on the card a few days later, and the merchant's next payout is €60 lower.
A refund is a second payment. Same card, opposite direction.
Visa's rules call it a credit transaction: a transaction representing a merchant's refund or price adjustment credited to a cardholder's account. It travels the same route as a sale, through the acquirer and the scheme to the issuer, and it appears on the merchant's statement as a deduction from takings.
It is not an undo button. If the original payment has only been approved and not yet captured, the right tool is cancelling the approval. After capture, you refund. The customer sees both lines on the statement.
The law sets part of the rules. Under the EU Consumer Rights Directive, a consumer who buys at a distance or off the premises has 14 days to withdraw without giving a reason (Article 9), and the trader must reimburse all payments received within 14 days of learning of the withdrawal (Article 13), using the same means of payment as the consumer used, unless the consumer agrees otherwise. Exceptions exist, so check the contract type.
Separately, PSD2 lets a payer ask their own provider for a refund of an authorised payment initiated through the payee when the authorisation did not specify the exact amount and the amount exceeded what they could reasonably have expected. The window is eight weeks (Articles 76 and 77).
The common slip.
They refund by bank transfer, outside the card, because it feels faster. It breaks the audit trail and can leave the original payment open to a dispute.
Refund to the card that paid. It keeps the books honest and the customer calm.