What Is Provisional Credit and How Does It Work?


When you file a claim for a disputed transaction, financial institutions issue provisional credits or temporary credits until the issue is resolved. However, you must submit a notice of error to your bank within 60 days to receive temporary credit.

Seeing an unauthorized charge on your bank account can send anyone into panic mode. According to recent data from the Federal Trade Commission, Americans lost more than $5.8 million to fraud in 2021, an increase of 70% from 2020.

Fortunately, debit and credit cards have built-in protection for stolen or lost credit cards, which means you get your money back for unauthorized transactions. Before getting reimbursed, your financial institution will apply a provisional credit to your account as a placeholder for the actual funds.

But how does provisional credit work? And how long will it take to receive this credit? Keep reading to find out more about this form of credit, when you can expect to receive it, and what you’ll need to receive it.

What is a provisional credit?

A provisional credit is a temporary issued credit from a financial institution. Because of this, it’s important to remember that your institution can reverse the funds at any time.

“This provisional credit is intended to cover the amount of the disputed charge, so the customer is not required to pay for it while the dispute is being resolved,” says Bruce Mohr, credit consultant at Fair Credit. “Once the dispute is resolved, the provisional credit may be removed from the account and replaced with the final, corrected charge.”

Provisional credit vs. permanent credit

Provisional credit is different from permanent credit. As Mohr explains, provisional credit can be removed or adjusted once your bank resolves the dispute. Meanwhile, permanent credit is applied to the account as a permanent adjustment to the charge.

The credit will typically appear as a line on your statement as “provisional credit” without specifying its reason. If you aren’t sure why you received temporary credit, call your institution to clarify. Normally, the issuing bank or credit union should tell you why they gave you the provisional credit, where it came from, and how long it’ll take before the credit becomes permanent.

Graphic demonstrating how a provisional credit would display on a mobile banking app


Why do financial institutions issue temporary credit?

Institutions often issue temporary credit due to an unverifiable or fraudulent charge. So, the credit acts as a placeholder until your institution can resolve the transaction dispute.

You may see a temporary credit issued on your account due to the following reasons:

  • Change in error. The merchant committed a mistake in the transaction process, like processing charges or billing for a canceled subscription.
  • Fraudulent charge. This is an unauthorized transaction conducted by someone other than yourself.

How does provisional credit work?

As mentioned earlier, a provisional credit will be applied to your account by your institution. Your institution will work with the retailer’s institution or wherever the unauthorized payment originated from. Then, your bank will take the cost of the disputed amount from the merchant’s account and issue the temporary credit to your account. However, this isn’t always the case.

Depending on the complexity of your case, your institution may wait to issue a provisional credit. This means you may not see the credit applied to your account immediately. In fact, your bank may choose not to apply a temporary credit to your account at all during the dispute investigation.

How do you get temporary credit applied to your account?

To qualify for temporary credit, you must submit a claim 60 days from the earliest date the disputed transaction happened. While you can file a dispute with your merchant despite exceeding the 60 days, this doesn’t guarantee temporary credit.

In addition, you may have to supply your financial institution with sales receipts, invoices, or any communication you’ve had with the vendor related to the transaction. This could include emails, letters, call details, etc.

IMPORTANT! Some companies will ask for more information than those listed above. You may, for instance, also have to provide any refund receipts or ATM receipts related to the transaction.

Types of unauthorized electronic fund transfers that qualify for provisional credits

Limited disputes and transaction types under Regulation E are eligible for provisional credit. Regulation E is a set of rules created by the Federal Reserve Board that outlines the responsibilities of electronic debit card issuers. These include automated teller machines (ATM), automated clearing house (ACH) systems, and point-of-sale transactions.

You may be entitled to temporary credit if you experience any of the following transactional errors.

  • Unauthorized electronic funds transfers
  • Incorrect electronic fund transfer from your account
  • Omission of an electronic fund transfer from your bank statement
  • Computational or bookkeeping errors made by your institution
  • Incorrect amount of money from an automated teller machine (ATM) or other electronic terminals
  • Errors involving pre-authorized transfers

Can you receive a temporary credit earlier?

Your institution’s investigation team must work quickly to determine if the charge on your account was wrongfully applied. Typically, this means resolving the dispute within ten business days of receiving your claim. Within those ten days, your institution may disburse a provisional credit to your account.

If the institution cannot resolve the error within those ten days, the investigation continue for up to 45 days to fix the alleged error for complex cases. If you’d like to expedite the disbursement process, ask the retailer if they’ll cancel or change the amount charged.

How long does temporary credit last?

It’s difficult to know how long a dispute investigation will take. In several cases, it may last up to 90 days. Your financial institution will issue the temporary credit as a placeholder until the bank has confirmed the disputed transaction has happened.

Pro Tip

The temporary credit reflected on your account may not equal the final, permanent reimbursement. For example, your provisional credit of $100 may be removed and replaced with a permanent credit of $50. Be sure not to overdraft your account or max your credit limit if you decide to spend the temporary credit.

Can merchants reverse temporary credits?

Merchants can reverse a provisional credit if they believe your dispute claims are invalid. The merchant can reject the chargeback request from your institution by building a case to prove that you did authorize the transaction. As a result, the institution will take the credit from your account and return it to the merchant. This process is called representation.

Does representation guarantee a provisional credit reversal?

While representation allows the merchant to reclaim their money in the case of a false chargeback, the merchant can’t guarantee a temporary credit reversal. According to 2022 ChargeBack Field Reports, the net recovery rates for merchants are less than 10% of all the chargebacks disputed. So, institutions tend to err on the consumer’s side over the merchant’s.

Protect yourself from identity theft

There are several reasons your institution may give you provisional credit, including fraudulent charges on your account. While provisional credit is nice to have, identity theft isn’t. That’s why it’s crucial to be vigilant and take action to protect yourself from identity theft. Credit monitoring companies make it easy to track suspicious activity on your account.

Need help figuring out where to begin? Take a look at the comparison tool below to start looking for and comparing credit monitoring services available to you.


Do banks have to give you provisional credit?

No. By law, financial institutions aren’t required to give you provisional credit, especially if you dispute a charge 60 days after the initial transaction.

What happens if you use provisional credit?

While you can theoretically spend your temporary credit, practicing caution is essential. If your institution withdraws the provisional credit from your checking account, you may end up with a negative balance. Similarly, you may run the risk of exceeding your credit limit with a credit card.

How long does a bank have to give provisional credit?

Banks and credit unions usually disburse provisional credit into your account within ten days of receiving a notice of error.

Can provisional credit be denied?

Yes, provisional credit can be reversed or denied if you falsely dispute a transaction.

How do I qualify for a provisional credit?

You must send an official complaint letter to your financial institution where the charge was authorized to obtain provisional credit. Your institution may require you to present proof of the transaction, such as sales receipts, invoices, or any communication you’ve had with the vendor related to the transaction

How does provisional credit hurt merchants?

To receive provisional credit, the institution must take from the merchant’s bank or credit union until its investigation team resolves the dispute. The merchant must also undertake administrative costs through a chargeback fee.

If the merchant is responsible for an increasing number of provisional credits (especially if the disputes are fraudulent), it could hurt the merchant’s bottom line.

Key Takeaways

  • Provisional credit is a temporary credit issued by your financial institution.
  • While your institution investigates the disputed transaction, it takes funds from the merchant’s account and applies provisional credit to yours.
  • You can get temporary credit by writing a notice of the error to your financial institution within 60 days of the transaction.
  • Through a process called representation, merchants can request to reverse provisional credit for falsely disputed charges.
  • Provisional credits can last up to 90 days as long as the investigation is still pending.
  • Provisional credit may only be available for some transactions.
View Article Sources
  1. § 1005.11 Procedures for resolving errors. — Consumer Financial Protection Bureau
  2. New Data Shows FTC Received 2.8 Million Fraud Reports from Consumers in 2021 — Federal Traded Commission
  3. 2022 Chargeback Field Report — Chargebacks911
  4. What Happens if You Falsely Dispute a Credit Card Charge? — SuperMoney
  5. How To Find Out If Someone Opened a Credit Card In My Name — SuperMoney
  6. Fraud Alerts and Credit Freezes: Options Against Identity Fraud — SuperMoney
  7. Types of Frauds: Complete List and How to Avoid Them — SuperMoney
  8. The IRS, Scammers And Identity Theft — SuperMoney
  9. What is Swiping Scamming? — SuperMoney
  10. How To Freeze Your Credit — SuperMoney
  11. My bank debit card was hacked! And it might happen to you too… — SuperMoney
  12. Compare Credit Monitoring Services — SuperMoney