Provisional Credit: What You Need to Know

If your account statement includes credit card transactions that you don’t recognize, you may have been the victim of credit card fraud. This can happen if your credit card has been stolen or otherwise compromised.

It can be really upsetting to find suspicious charges on your credit card account, but don’t panic. Under Regulation E (also called “Reg E”), consumers have zero liability for a fraudulent debit card or credit card purchases, but you must report the unauthorized transaction to the bank or credit card company in a timely manner. Your credit card company will usually investigate the fraudulent activity to make sure you don’t have to pay for the suspected fraudulent charges.

But what good is an investigation if someone already spent the money on your credit card account? Their charges might mean you no longer have enough funds to pay bills or make other necessary purchases with your card. This is where a provisional credit comes in. 

What is provisional credit?

A “provisional credit” is a temporary credit, in the amount of the disputed transaction, that is applied to your account while your bank or credit card company completes their investigation. Financial institutions issue these credits because they know their customers still need access to funds, even during a fraud investigation. 

If the investigation determines that the alleged error was, in fact, incorrect, the provisional credit becomes permanent because you are no longer responsible for the disputed transaction. But if the investigation determines that you’re responsible for the charges, the provisional credit will be reversed.

Q: Are provisional credits permanent?

A: Provisional credits are temporary while the investigation is ongoing. During the investigation, the credit card company will try to verify the charge on your account, resolve an error, or determine if fraud occurred.

Why are provisional credits given out?

A credit card company will issue a provisional credit to cover the amount of a disputed transaction. The transaction dispute, for example, may be the result of credit card fraud or an alleged error in a credit card charge. This can happen a couple of ways:

Merchant error: A seller might accidentally process a purchase twice (for example, you’re charged twice for a laptop you bought). Or you might find you’re still being charged for a streaming service or subscription you already canceled. These are examples of “charge error” and may result in a provisional credit when you dispute them.

Fraudulent charge: A fraudulent charge on your account is more than a simple charge error. A fraudulent transaction happens when someone makes purchases using your card without your permission. Fraudulent charges can occur due to credit or debit card theft or other account fraud.

No matter how the charge happens, your credit card company or bank may issue you a provisional credit to help cover the cost of the purchases. Should you have questions regarding a provisional credit, it’s best to contact your bank or credit card company directly.

Q: How do you prove fraudulent charges?

A: If you have an unknown charge, you can help the investigation by providing documentation that proves that the charge was fraudulent. For example, if you have an email exchange between yourself and a merchant for an item you did not order.

Who gets a provisional credit?

So, who exactly gets a provisional credit? As mentioned before, provisional credits can happen due to a merchant charge error or because of credit card fraud. But there are other situations that can result in a temporary credit while the credit card company investigates:

• You have unauthorized charges (which can happen if you lose your card)
• You purchased something that cost more than you agreed to (for example, a purchase with undisclosed charges or fees).
• You were accidentally charged for things you did not purchase, such as a double charge. 
• You bought something that that was different from what was advertised. 
• You have a billing error (such as a charge for a subscription that you already cancelled).

This is not a complete list of situations that are eligible for temporary credit, but your credit card or debit card company will determine your eligibility for provisional credit based on their investigation criteria.

What are important considerations about provisional credits?

How long does a provisional credit last?

There isn’t an exact timeframe for how long a provisional credit will last, and it largely depends on the financial institution and when they finish their investigation. But the credit may be available until your bank or credit card company completes the process. Your credit card issuer or bank will make the credit permanent if they find out that the alleged error was, in fact, unauthorized or a merchant mistake.

Should you spend a provisional credit?

You can spend your provisional credit just like any other money in your account. However, you should remember that the credit is not permanent until the credit card company or bank resolves the dispute in your favor.   

You may need to use the money, but the credit can be removed (also called a provisional credit reversal). You should always contact your credit card company or bank to get updates on the dispute investigation and not rely on a permanent credit until you have the final settlement outcome.

What should you do if your provisional credit is reversed?

Provisional credit acts as a holding measure for accountholders when transaction disputes arise. They exist to provide customers with a temporary resolution while allowing banks time to investigate the dispute. Still, provisional credits are not issued in every investigation into charge errors or potentially fraudulent charges.

Provisional credits help you access funds even when a dispute happens. Still, it is important to remember that a permanent credit may not be issued every time an error or fraud occurs. Carefully monitor your account for errors and watch for signs of credit card fraud, as it will go a long way to help you protect your account. Learn more about how to dispute a credit card charge.