What is Provisional Credit?

What Does Provisional Credit Mean?

A provisional credit is a temporary credit that your bank or credit card issuer gives you while it investigates a disputed transaction or account error. The credit is usually equal to the amount of the dispute charges, but it may not be permanent.

Banks may provide provisional credit if they can't complete their investigation quickly. During the investigation, the provisional credit adds the disputed amount to your balance so you can keep using your account. Then, once the investigation is complete, one of two things will happen:

• If the bank determines the charge was unauthorized or incorrect, the provisional credit becomes permanent and you keep it.
• If the bank determines the charge was valid, the provisional credit may be removed from your account.

Triggers of a Provisional Credit

Your bank may issue a provisional credit when you dispute certain types of transactions, as in the following scenarios:

• Unauthorized transactions: Someone used your account without your permission, such as a stolen credit card number or fraudulent online purchase.
• Overcharged by a merchant: You were billed more than you expected. For instance, you were charged twice for the same purchase.
• Billed for canceled subscriptions: If a company continues charging your account after you cancel a service or membership, disputing the charge may lead to a provisional credit.
• ATM disbursement errors: If an ATM dispenses the wrong amount or your account shows a withdrawal even though you didn't receive any cash.
• Bank errors: Sometimes banks accidentally post incorrect transactions or process transfers incorrectly. You may receive a provisional credit while these bank errors are being reviewed.

A provisional dispute isn't automatic. Banks typically only provide the temporary credit if they can't complete the investigation within 10 business days. If the bank resolves the dispute quickly, you may receive a permanent credit rather than a provisional one.

How Does Provisional Credit Work?

There are several steps in the provisional credit process:

1. You file a dispute. You can typically submit a dispute online, by phone or in writing. If you make a dispute over the phone, the bank may ask you to follow up with a written dispute within 10 days.
2. The bank confirms your dispute and reviews. The bank contacts the merchant and reviews the transaction records to determine whether the transaction is legitimate.
3. A provisional credit is added. If the bank can't complete the investigation within 10 business days, they're required to provide a provisional credit for the disputed amount. The bank may also temporarily reverse any fees or interest charges related to the disputed transaction.
4. The investigation is completed. After reviewing the evidence, the bank determines whether the transaction was valid or an error. Depending on the results of the investigation, the provisional credit either becomes permanent or is reversed.
5. The bank sends notice of the results. You'll receive a written explanation of the investigation outcome and whether or not you keep the provisional credit.

What to Include in a Dispute

When you file a dispute, you'll need to include enough information for the bank to locate the transaction.

This includes:

• Your name and account number
• A statement that you're disputing an error
• The date and amount of the transaction
• The type of error

If you wait too long to dispute, you may not receive a provisional credit. You typically have 60 days from the date your bank sends the statement that lists disputed transactions to report an issue. After that, the bank isn't obligated to investigate your dispute and you may be fully responsible for the charges.

How Long Does a Provisional Credit Last?

The provisional credit generally lasts while the bank completes its investigation. They generally have up to 45 days to investigate, but in some cases may have up to 90 days to investigate.

What Can Delay a Provisional Credit?

The bank may take longer to resolve a provisional credit if:

• The transactions were made in a foreign country
• Your account is under 30 days old
• The transactions are debit card purchases made at a point of sale

Can You Spend a Provisional Credit?

You generally have full use of the provisional credit during the investigation. You can spend or withdraw the provisional credit just like the rest of the money in your account, but using the money comes with risks.

If the bank ultimately determines the transaction was valid, the provisional credit will be removed from your account. If you've already spent the money, your account balance could drop significantly or even become negative.

Tip: You may receive a new credit or debit card if the dispute involves fraud on your account. Be sure to update your subscriptions, automatic bill payments and mobile wallet with your new card information.

Provisional Credit for Debit Cards vs. Credit Cards

Provisional credit works slightly differently with deposit accounts and credit cards.

With checking accounts, savings accounts and debit cards, the provisional credit is a temporary credit to your account. It replaces the money that's been removed from your account while the bank investigates.

With credit card disputes, the card issuer typically removes the disputed charge from your account balance during the. This essentially restores your available credit and means you don't have to pay the disputed charges while the investigation is ongoing. Keep this in mind if your balance is nearing your credit limit.

Can a Provisional Credit Be Reversed?

Provisional credit can be reversed and removed from your account in certain situations. A bank may remove the provisional credit if:

• You cancel the dispute
• The merchant issues a refund
• The bank's investigation determines the transaction was valid

For instance, the credit may be reversed if the bank determines:

• You or an authorized user made the purchase
• The merchant provides proof that confirms the transaction
• Your dispute was filed after the 60-day timeframe
• The transaction matches a recurring payment you previously authorized

When a provisional credit is reversed, the bank is required to notify you of the date and amount that your account will be debited. Meanwhile, the bank is required to honor any pending transactions for five business days without charging you an overdraft fee.

If you don't agree with the bank's decision, you may still have options. You can:

• Request the bank's investigation results. You can ask for documentation or an explanation showing how the bank reached their decision.
• Provide additional evidence. Based on the bank's investigation results, you can submit new evidence to support your dispute. This may include receipts, emails, shipping records or cancellation confirmations.
• Ask to reopen or escalate the dispute. Your bank may review the dispute again if you provide new information about the charges.

Learn more: How Much Money Should You Keep in Checking and Savings?

Frequently Asked Questions

The Bottom Line

A provisional credit can help temporarily while your bank investigates a disputed transaction. However, it's important to remember that the credit may not be permanent. If you can afford to, avoid spending the credit until the investigation ends. That way, you prevent unexpected balance changes if the credit is reversed.

Maintaining an emergency fund or having access to a credit card can help you cover expenses while the bank investigates. Be sure to regularly review your account activity so you can identify and report suspicious transactions quickly.