What Is Provisional Credit and How Does It Work?

When you dispute a transaction with your financial institution, they may provide you with what is called a provisional credit while they investigate the charge you’re contesting. This means that you receive temporary credit as a placeholder until the financial institution’s investigation comes to a close, at which point they may permanently apply the credit or revoke it.

Let’s explain provisional credit, when it’s issued and what happens after the investigation is resolved.

What does provisional credit mean?

Provisional credit is a temporary credit to an account made by a bank or card issuer while they investigate a disputed charge or error. At the end of the investigation, if they deem that the disputed transaction was made in error or fraudulently, you’ll keep the credit. If the charges are deemed valid, they may reverse the provisional credit.

When is a provisional credit issued?

Your financial institution or card issuer might provide a provisional credit when you dispute an unauthorized debit, billing error or fraudulent charge. For debit card transactions, ATMs withdrawals and ACH payments, if a dispute cannot be resolved within 10 business days, financial institutions are generally required to issue a provisional credit within those 10 business days while they continue their investigation. This requirement does not apply to credit card transactions.

How does provisional credit work?

There are a few different steps to receiving provisional credit from a financial institution or card issuer, such as: 

• Filing a dispute: You typically must file a dispute to receive a provisional credit from a financial institution or a card issuer. 
• Reviewing the dispute: The financial institution or card issuer may review the dispute before issuing a provisional credit. 
• Issuing a provisional credit: For credit cards, if it’s determined that the dispute could be warranted, the credit card issuer generally issues a provisional credit. For debit cards, ATM withdrawals and ACH payments, if a bank’s investigation doesn’t end within ten days, they are required to provide you with a provisional credit. 
• Finalizing the credit: After the investigation ends, the financial institution or the card provider may decide to make the temporary credit permanent if they deem that the transaction was an error or fraudulent, or they may reverse the credit if they find that there was no error. 

It’s important to note that terms and timelines for provisional credits may vary based on the type of transactions and the institution. 

Can provisional credit be taken back?

Provisional credit is typically a temporary measure. If the financial institution rules that the disputed charges were legitimate, they can reverse the credit, and you might be responsible for the original charge. For that reason, you may not want to spend the provisional credit’s funds before the investigation ends. 

What to know before relying on provisional credit

There are some factors to consider when you receive a provisional credit, like: 

• Potentially temporary: Remember that provisional credit may be reversed if your dispute is invalidated.
• Keep documents needed for the investigation: The financial institution or card issuer may ask for evidence, like receipts, to help verify the amount of the charge and the date that your transaction took place.
• Check the terms and policies of the provisional credit: While there are some mandatory regulations some financial institutions and banks might also have their own policies, so ask about their guidelines for disputing fraud.

Provisional credit: Know how it works

When you are disputing a charge, a provisional credit can help. At the same time, you should keep in mind that the credit may be temporary, so it’s in your interest to help ensure that the investigation resolves in your favor. Providing the documents to help the investigation along might benefit you if you plan on relying on the provisional credit. Likewise, asking about your financial institution or card issuer’s policies for provisional credits might illuminate more of the specifics for your situation. 

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.