With near-immediate access to financial information in your pocket, it’s not uncommon to see pending transactions on your statement occasionally. But just how long that pending status remains can vary, depending on your bank’s policies and the transaction’s circumstances.
So, how long do pending transactions take to clear? Let’s take a look.
What is a pending transaction?
In broad terms, a pending transaction is any transaction that hasn’t been fully processed as it navigates the payment networks, your bank and the charging merchant.
Your credit card or bank statement may reflect these transactions as “pending” or “processing.” Once the transaction finalizes – when the merchant receives the money – it appears as a regular charge in your account.
Technically, pending charges are still in your account. But once you swipe your card, you’ve entered a legal agreement that a set amount is eligible for withdrawal to another institution. Your available balance usually won’t reflect funds held for pending charges.
Why do transactions “pend”?
Several reasons may cause transactions to enter pending status. However, the most common is that pending transactions are a product of increased security measures to prevent financial fraud. When a merchant runs your card, it’s confirming that the account is yours and has sufficient funds or credit for the intended purchase.
According to a 1999 report from the U.S. Department of Treasury, check fraud cost the U.S. economy over $1 billion between 1996 and 1997. Fraud was a big catalyst for switching to credit cards, which offer numerous digital security measures to protect consumers and merchants.
In other words, pending charges are an extension of the fraud protection measures merchants take to verify transactions. While multiple kinds of credit card fraud persist, the equivalent of writing a bad check is more difficult thanks to pending transactions.
How long do pending transactions take to clear?
Most pending charges disappear in around 5 days or less, though some institutions ask cardholders to allow up to 7 days to process charges.
While merchants typically clear their purchases daily, taking longer to process your purchase can contribute to extended pending times.
Note that certain transactions also have longer processing times to allow time for additional purchases to be added later, such as room service bills or cleaning fees. You commonly find these extended periods in the hotel, car rental and airline industries.
Additionally, if your purchase is subject to further review, it may take longer for the pending transaction to disappear.
After the review period ends, the money may disappear from your account to complete the transaction or return to your account following a hold period. If you’re using a credit card, pending transactions turn into posted charges that you’ll have to repay later.
Fortunately, laws exist to ensure merchants complete these steps reasonably quickly. Failure to do so can result in misuse fees from financial institutions and government bodies.
Why do pending transactions take so long to clear?
Pending transactions can take time because the funds are on hold, as shown below. Individual merchants and financial institutions may also take time to process electronic transactions through the Automated Clearing House (ACH) network.
Remember that each purchase is subject to review from three different entities:
· The merchant’s bank
· The consumer’s bank or creditor
· The ACH
Types of pending transactions
The time it takes for a pending transaction to disappear from your bank account varies by merchant and charge. Let’s examine a few kinds of pending transactions you may encounter.
Merchant debit card holds
Merchants issue holds on funds to ensure they’re available even before the purchase officially goes through. Going back to the bad check metaphor, it’s a modern solution to protect vendors and ensure adequate funds to cover a pending transaction.
Most merchant holds are removed at the end of a given business day. However, that’s not a hard-and-fast rule, and charges may take longer, particularly near weekends and holidays. If your pending transaction disappeared and funds were returned, it’s either your lucky day or the merchant couldn’t fulfill the transaction.
Bank holds, also called administrative holds, are used by financial institutions. While bank holds are usually used to avoid overdrafts, other reasons may include:
· Late credit card payments
· Low balances in your checking or savings account
· Unusual account activity
· Payment disputes filed by merchants
Credit card transaction holds
Credit card transactions clear faster than debit payments or bank holds. An internet connection is all that’s needed for a merchant to confirm the line of credit exists after a customer swipes.
Credit card companies typically approve the transactions at the point of purchase, though the pending period may last around 48 hours. Typically, credit card transactions clear faster because of the regularity of the purchaser (technically, the credit card issuer).
For consumers, the real payment is made later when their card statement comes due.
How long does a pending transaction take to expire?
A pending charge generally indicates to merchants that funds are available, even if the transaction hasn’t cleared yet.
However, if the merchant never attempts to clear the transaction, the charge expires, and the amount is returned to the debit or credit account. If you’re already in possession of the item in question, that’s a good day for you.
Expired pending transactions aren’t always a good thing. For instance, if the pending transaction expires because of a change in fund availability, you may see your purchase denied. Depending on the transaction, you could see an item fail to ship or an intangible purchase – like a Netflix subscription – canceled.
How long do pending transactions take? Usually not long at all
Pending transactions occur for several reasons, but ultimately, it means you’ve authorized a third party to remove funds from your account. The primary function of the pending process is to reduce fraud for yourself and the merchant.
Generally, pending transactions should clear in a matter of days. But in rare cases, you may see a transaction take a little longer – usually when holds are involved.
What does it mean when a transaction is pending?
When a transaction is pending, a third party has been approved to access an agreed-upon sum from your account within a few days. Timeframes may range from a few hours up to a month, depending on the exact hold.
Can I spend money that is pending?
No, you can’t. Since a pending transaction represents an amount of money pledged to another transaction, you can’t double-spend your funds.
When do pending transactions go through?
Most pending transactions clear in 1 to 2 days, but some take up to a week. In cases involving holds rather than just pending transactions (like those charged for hotel bookings), you may wait up to about a month.