ELI5: Why does it take 5 seconds for credit card/debit card companies to take money out of my account but 5 days for them to refund it?

Different systems… First you have to realize there is a difference between authorizations and postings.

A charge is only “real” against your account when it’s posted. It’s posted when the merchant does their batch close (typically) except for debit. When you do a credit transaction there is an authorization against your account but you don’t “owe” the money until it posts.

Refunds to debit if done at a POS terminal should be automatic (just like charges).

Refunds to credit take time because they go through the same path as charges. If it took 3 days for your charge to post you can be assured it will take 3 days for the refund to post.

Now why don’t they just authorize refunds? I suspect because when you auth a charge no money has changed hands yet. The bank [or credit company] still has the money they were lending you. It only goes to the merchant when they do a batch close and post the transaction. So if they did an auth refund there would be two copies of the same money. You’d have your refund and the merchant wouldn’t have had to cough up the money yet.

Now why do they take so long to do batch closes? Probably because each close costs money (+ transaction fees and percentages). So they do them every few days to save money.

Explain Like I`m Five: good questions, best answers.