Pending payment means that a payment (either a deposit or withdrawal) is processing but has yet to officially clear. In most accounts, this will be reflected in your available balance, which takes pending transactions into account, versus your current balance, which shows only cleared transactions. There are a multitude of reasons why payments show up as “pending” and don’t hit your bank account instantaneously. But usually payment delays are caused by authorizations that prevent both you and your bank from fraud.
We’ve all been there before, staring endlessly at a computer screen, wondering why money that was sent to us is not there yet. According to the information on the screen, the deposit is pending, but it’s not officially showing up in your current account balance. If this happens to you, take a deep breath. You don’t need to demand to speak to a manager or consider breaking various bank-related machines. This is a normal part of the modern-day payment system.
Pending status and fraud
The payment process is designed to mitigate as much risk as possible for both you and the bank. In the case of credit cards, companies that you buy from will pre-authorize your credit card, but the money will be issued to the merchant a few days later. This is done to prevent fraud. In the case of wire transfers, the funds need to move through various points of the financial system, such as clearinghouses and corresponding banks, before hitting your account.
If you write a check, your bank might hold onto the check for a period of time before processing the funds so that it passes various internal compliance checks. All of these issues will result in payments being defined as “pending” or as a “pending transaction.” In other words, they are both there and not there but will be fully there soon. “Pending” is the Schrödinger cat of banking.
Here is how pending payments work.
Bank balances and pending payments
Typically, when you look at your bank account online or through a mobile banking app, you will see two numbers, your available balance, and your current balance.
The current balance is the amount of money that is actually sitting in your account at any one time and does not include pending transactions. It represents transactions that have been completely processed on the account. You can’t necessarily rely on this number because there may be transactions that haven’t gone through yet.
Every website and app is different, so they may show either balance more prominently or call the current balance a “posted balance” or something similar.
The available balance is the amount of money that you have available to you in your online account bank statement right now. It’s based on the deposits and withdrawals of your account, as well as pending transactions that make up funds availability.
Don’t forget to account for any automated bill payments you have set up before you spend the money in your available balance.
Why is the money pending?
Although there are all sorts of exotic online payment platforms, decentralized P2P crypto exchanges, and so on, we will just cover the majority of ways people send and spend money historically: credit cards, debit cards, checks, and wires.
In most cases, credit card companies take time to fully process payments to protect both of you from fraud. Usually, they are protecting themselves from a large fraud claim or a lawsuit against them. Firstly, they need to make sure that the credit card transaction doesn’t raise any red flags for fraud. If the transaction seems a little suspicious but not suspicious enough to decline, it might take a few days for them to officially clear it and pass the funds to the vendor.
Usually, the vendor will authorize the credit card through a credit card payment processor. This means that the vendor knows the credit card is valid and has enough money to cover the transaction before it’s fully processed. That transaction you made with your credit card will show up in the available funds’ balance but not in the current balance until it’s fully cleared and issued.
Credit card holds
Another case in which a transaction might show up as pending is a hold on your credit card. A hold is typically placed on your card when you book a hotel or rent a car. The vendor is not officially charging your card for the amount you owe, but they are holding a certain sum as a sort of deposit. As long as everything is OK, your card will never be officially charged, and the amount of the hold will never be processed as a payment. However, that hold could show up in your available funds’ balance until the hold is over.
Debit card transactions typically take less time than credit card transactions to process fully. In most cases, the transaction will be cleared or posted instantly or within 24 hours. It’s actually quite rare to have a debit card transaction pending for a significant period of time.
When you swipe a debit card and authorize it, the processor (Visa, Mastercard, etc.) checks that the card is valid and the bank verifies the availability of funds; then, the bank sends the money to the vendor. However, this quick processing means that debit cards are not ideal for transactions that require a hold. You might want to keep the money in your available cash balance and use a credit card instead.
Paper checks may not be as common as they were 20 years ago, but many people still use them. Sometimes a check’s dollar amount will show up in your account the day you deposit it. Sometimes it will show up on your available balance and not your current balance for a few days. Just like the credit card companies are looking for fraud, banks are as well.
Typically this process takes two business days to complete. However, in some cases, it might take 3-5 days if the check is unusual or the deposit is between two different banks. A check that you wrote or a check you deposited might show up in your available balance but not your current balance.
Wiring funds can take a while, especially if you wire money from one country to another, where there are different currencies involved.
Domestic wires: Fedwire & CHIPS
With domestic wires, the wire needs to be processed through the FedWire system, the CHIPS system, or both. CHIPS stands for Clearinghouse Interbank Payment System. These are both types of domestic clearinghouses that the transfer must pass through before being fully issued. Because of EFAA (Expedited Funds Availability Act) regulation, most domestic transfers from bank to bank are credited and issued within one full business day.
International wires: SWIFT
International wires are a different story, and many banks will give you a timetable of 3-5 days for an international wire to be cleared. Most international wires use a system called the Society for Worldwide Interbank Communication or SWIFT system. Most international transfers cannot be done between two banks directly. Instead, many times they pass through a corresponding bank.
For example, let’s say that you bank with a small community bank called 2Trees bank of Tennessee. You want to send yourself $5,000 USD out of the multicurrency account you have at Hang Seng Bank in Hong Kong. Hang Seng Bank cannot send money directly to 2trees; instead, they will use a larger corresponding bank, like Wells Fargo NYC, to send the money to initially before it gets credited to you. Due to the involvement of various corresponding banks and clearinghouses, international wires tend to take longer.
A domestic wire or an international wire can take a few days to process. During this period of time, the transaction will show up as pending, affecting your available account balance. Once the transaction clears, the money will be reflected in your current account balance.
How long does it take for a pending payment to go through?
It depends on what method you used. In the case of most checks, it takes two business days. With a wire, it’s 24 hours if domestic and 3-5 business days if international.
Does pending mean money has been taken out?
A pending charge means that the money hasn’t been taken out yet, but will be after it clears the proper process hurdles. A pending transaction can subtract money out of your available balance, though, which is the money you have available to spend.
Can pending transactions be declined?
Yes, a pending transaction can be declined if there is a reason for it. You may also be able to cancel a pending payment, but you will have to contact the merchant to find out.
Why would a transaction be pending?
Credit card companies and banks run checks for fraudulent transactions, hotels and rental car companies use temporary holds as deposits, and wire transfers may need to run through a clearinghouse before they post to your account.
- A pending payment is a payment that is processing but has not been fully issued or posted.
- Pending transactions will show up in your available account balance but not your current account balance.
- Banks and credit card companies run authorization checks before processing payments to protect both of you from fraud.
- The reasons for pending transactions vary depending on whether you used a credit or debit card, check, or wire.
- Wire transfers use different systems for money sent domestically versus internationally. International wires will show as pending for longer than domestic wires.
View Article Sources
- The Difference Between Available Balance and Current Balance – Midwest Community Federal Credit Union
- Fair Credit Billing Act – Federal Trade Commission
- CHIPS system – Clearinghouse.org