Financial Education Resources

Have you ever disputed a debit card transaction with your bank, only to be told that you will receive a provisional credit? You filed the dispute, credit was issued, and all is well. Or is it?

Understanding provisional credit and the transaction dispute process is a vital step for effectively monitoring your bank account and balancing your finances. Keep reading to learn more about the provisional credit process.

What is a provisional credit?

By definition, a provisional credit is a temporary credit. At Centennial Bank, provisional credit is issued after a signed dispute form for the transaction has been received. This credit is issued, while the charge is verified. However, the charge is not a permanent refund. This depends on the results of the investigation into the charges.

Why do banks issue provisional credits?

Legitimate claims that would entitle someone to a debit card provisional credit are as follows:

• The transaction in question was unauthorized.
• The transaction total was more than what the cardholder agreed to at the point of purchase.
• The merchant committed an error in the transaction process.
• The merchant submitted a rebill for a subscription after the cardholder canceled the service.

There are a multitude of reasons why a bank might issue a provisional credit, but it is ultimately at their discretion.

How does provisional credit work?

When a transaction is disputed by a customer and the signed dispute form is submitted, Centennial Bank begins the process of validating it. If the claim is legitimate, a provisional credit is issued to the customer as a means of financial relief while the dispute is investigated. Once the investigation is complete, Centennial Bank will notify customers by letter of the findings. If the charge was a fraudulent charge or one made in error, the provisional credit will become permanent. If the charge was legitimate, the provisional credit will be reversed, debiting the value of the transaction from the customer’s account.

Here’s a breakdown of the process:  

1. Cardholder Disputes Transaction – the cardholder contacts the bank to dispute an unauthorized transaction.
2. Initial Review – the bank receives the cardholder’s inquiry and does a quick review of the claim.
3. Applying Provisional Credit – if the bank finds that the dispute is valid, they will issue a provisional credit. This will temporarily credit the cardholder’s account with an amount equal to the disputed transaction.
4. Conducting the Investigation – The bank investigates in more depth, examining the transaction details and evidence from the merchant and the customer.
5. Finalizing the Dispute - the bank determines whether the dispute is valid.

• • Valid Dispute – If the bank confirms that the dispute is valid, the provisional credit becomes permanent.
  • Invalid Dispute – If the bank confirms that the disputed charge was not fraudulent or erroneous, the provisional credit will be reversed.

6. Notification – Once a determination is made about the validity of the disputed charge, the bank will notify the customer in writing to explain the result, as well as their decision.