Understanding Provisional Credit: What It Means and How It Protects Your Business

Provisional credit is one of those financial terms most people don’t encounter until something goes wrong. It typically comes into play after you spot a suspicious charge, a billing mistake, or a transaction you don’t recognize. When that happens, your bank or card issuer may issue a temporary refund while they investigate the issue.

This article explains what provisional credit is, how it works, and what to expect if you ever need it. Whether you’re managing your personal finances or overseeing business spending, understanding provisional credit can help you avoid confusion and stay prepared if a dispute arises.

Provisional credit can offer peace of mind in the short term, but it isn’t something you want to rely on. The best way to avoid disputes and lengthy investigations is to prevent fraud in the first place. Working with a provider like Slash, which offers granular card controls, real-time alerts, and advanced fraud prevention tools, can help reduce the risk of unauthorized transactions altogether.¹ Continue reading to learn more about how Slash can safeguard your finances.

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What is provisional credit, and how does it work?

The term “provisional credit” can sound misleading at first. It may seem like you’re receiving a new line of credit, but that isn’t the case.

Provisional credit is a temporary refund that financial institutions provide to accountholders when they dispute a transaction on their account. It’s tied to a specific disputed transaction; the credited amount appears in your available balance, allowing you to access those funds during the dispute investigation. Provisional credit can apply to debit cards, credit cards, and charge cards alike.

At the same time, the bank, merchant, and card networks work together to determine whether the charge should be permanently reversed. If the dispute is approved, the provisional credit becomes permanent as part of a chargeback. If it’s denied, the provisional credit is reversed, and you’ll need to repay the amount if you’ve already spent it.

Key differences between provisional credit and chargebacks

While provisional credit is a temporary refund, a chargeback is the final and permanent reversal of a transaction. Understanding the distinction matters, especially since spending provisional credit before a decision is made can leave you responsible for repayment. Here’s how the two compare:

	Provisional Credit	Chargeback
Defintion	Temporary refund issued by a bank during a dispute investigation	Permanent payment reversal after a dispute is approved
Timing	Typically issued immediately or within 1–10 business days	Issued after an investigation, usually within 30–90 days
Status	Can be reversed if the dispute is denied	Final and non-reversible
Action	Issued automatically by the bank to the accountholder	Initiated by the bank against the merchant
Risk to accountholders	May need to be repaid if the dispute is rejected	No repayment required once approved

When a chargeback occurs, the bank permanently retrieves the disputed funds from the merchant. In addition to losing the sale, the merchant often pays a chargeback fee and may face penalties if disputes become frequent.

When are you eligible for provisional credit from a bank?

Eligibility for provisional credit depends on your bank’s policies, the type of dispute, and how quickly you report the issue. Most major banks follow federal guidelines that require provisional credit to be issued within certain timeframes for unauthorized or erroneous transactions.

In most cases, you’ll need to report a disputed charge within 60 days for credit cards or electronic fund transfers. Reporting issues promptly improves your chances of receiving provisional credit and helps limit potential losses.

Disputes generally fall into two categories that qualify for provisional credit:

Charge errors, such as:

Duplicate charges
Incorrect billing amounts
Charges for canceled or returned items
Charges for services you didn’t receive

Fraudulent charges, including:

Unauthorized purchases made with stolen card information
Identity theft leading to account misuse
Card details compromised in a data breach

How long does the dispute process take? 6 steps to resolve fraudulent charges

After submitting a dispute, investigations typically take between 30 and 90 days. Below is a general overview of how the process unfolds:

1. Identify the fraudulent charge

Regularly reviewing statements can help you catch unauthorized transactions early. With providers like Slash, real-time alerts and spending controls can surface issues immediately and reduce risk across all company cards.

2. Report the dispute to your financial institution

Contact your bank or card issuer as soon as you notice a problem. Disputes can usually be filed online, through a mobile app, by phone, or in person. Slash offers 24/7 phone and email support to guide customers through the reporting process.

3. Submit documentation to assist with the investigation

You may be asked to provide receipts, proof of returns, communication with a merchant, or documentation related to identity theft. Strong evidence that a charge was unauthorized can help speed up the investigation.

4. Initial review

Before conducting a full investigation, your bank will conduct a preliminary review to assess the validity of your dispute. It’s also at this stage when provisional credit is issued.

For electronic fund transfer disputes, federal law requires banks to provide provisional credit within 10 business days and complete investigations within 45 days (though this timeline can vary for new accounts, international transactions, and certain point-of-sale debits).

5. Investigation

Your bank will contact the merchant and review transaction records. The merchant will have an opportunity to defend the charge by showing proof of delivery, signed receipts, or terms of service agreements. This phase determines whether payment reversals are warranted.

6. Resolution

If the dispute is approved, the provisional credit becomes permanent and the chargeback is finalized. If denied, the provisional credit is reversed, and you may need to repay the funds if they were already used.

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Common provisional credit scenarios you may encounter

Disputes often arise from situations outside your control, and provisional credit can help soften the financial impact while things are sorted out. In most cases, the process begins as soon as you reach out to your bank after noticing a problem. While every dispute is different, some scenarios can come up more often than others:

Card-not-present fraud: Occurs when someone uses your card details online or over the phone without having the physical card. If you can show the card was still in your possession, your dispute is more likely to be approved.
Merchant disputes: These disputes arise when a merchant fails to deliver goods or services, delivers incorrect or damaged items, or refuses to honor legitimate returns or cancellations. Merchant disputes may take longer to resolve since both parties must provide evidence for the investigation.
Processing or posting errors: Your bank or card provider can make mistakes, such as duplicate charges or incorrect amounts caused by technical errors. These errors are often resolved quickly once identified, but sometimes can result in provisional credit being added to your account.

Secure your business’s finances with Slash

Managing disputes is easier when fraud is rare to begin with. Slash can help businesses reduce risk by giving finance teams real-time visibility into spending, customizable controls across cards, and proactive fraud detection powered by AI. Instead of reacting to unauthorized charges, you can prevent them before they happen—keeping your team focused on growth, not cleanup.

Even with provisional credit, funds can remain tied up for 30-90 days during dispute investigations. That temporary gap can ripple through payroll, vendor payments, or day-to-day operations, especially for businesses operating on tight margins. Slash can help your business withstand those disruptions. With built-in working capital and same-day access to your treasury reserves, you have the financial flexibility to keep things moving while disputes resolve.⁵, ⁶

Now that your disputes are handled, here's how Slash handles everything else:

Modern business banking: Organize your funds with virtual accounts for capital and treasury accounts for idle cash. Earn up to 3.86% annualized interest on reserves while keeping funds separated by purpose. Manage multiple business entities, locations, or subsidiaries from a single dashboard with consolidated reporting and clear visibility across all accounts.
Native cryptocurrency support: Convert funds into USD-pegged stablecoins such as USDT or USDC to send transfers on the blockchain, offering an alternative payment method that can reduce costs and settlement times.⁴
Dynamic payment methods: Send and receive payments globally with ACH and wire transfers to 180+ countries via SWIFT and real-time domestic payments through RTP and FedNow.
Flexible financing: With Slash’s working capital loan, you can draw down funds directly inside the platform whenever you need extra liquidity and choose between flexible 30-, 60-, or 90-day repayment terms that align with your cash flow forecasts
Accounting integrations: Sync transactions directly with QuickBooks to keep books up to date automatically. Slash also connects through Plaid and supports data imports from tools like Xero, making it easier to fit into existing accounting workflows.

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Frequently asked questions

Can you spend temporary credit?

Yes, provisional credit is usually added back to your available balance, so you can spend it. However, keep two things in mind: this represents funds returned for a specific disputed transaction, not a temporary credit line increase. And if the dispute is denied later, you'll need to repay that amount.