A reader wonders why her card was declined after she paid off her entire card balance online, from her checking account, and the card issuer had even received the payment.
So you can imagine reader Karen’s consternation when she tried to use her credit card and it was declined. When she called Capital One, the card issuer, she learned that it had put an eight-day hold on her payment, in spite of her having paid off her entire balance.
She says she made the payment online, in November, directly from her checking account. The payment had left her checking account the same day, and Capital One had even received the funds. Karen is wondering if it is legal for a card issuer to place such a hold.
When is payment credited
A federal law known as the Truth in Lending Act governs the minutiae of when card issuers should credit the payments you make. The Credit Card Act of 2009 also had a hand in improving TILA, laying out certain protections for cardholders. Before the Card Act went into effect, issuers had more of a free hand in doling out interest rate changes and fees to unsuspecting consumers.
The various protections of TILA include specific procedures for when a card issuer should credit your payment. And Karen, it is not illegal for an issuer to place the sort of hold you mention.
According to TILA, the issuer should credit your payment to your account the day it receives your funds. However, if it doesn’t make any finance charge, or another charge, to your account as a result of the delay in crediting, it can place a hold and delay when your account is credited.
The regulations also state that the cutoff time for payments to be made should be 5 p.m. or later, at the location where the payment is due, on the day the payment is due.
For the rare few who continue to go to a physical bank building to make their payment, the cutoff time is when the bank closes for business. In case the bank closes before 5 p.m., though, the actual closing time would be the deadline for payment.
In case the card issuer fails to acknowledge your timely payment and issues a finance charge, then it has to credit you back the charge in your next billing cycle.
See related: When should my credit card post my payment?
Card issuer practices
Placing a hold is not an illegal practice, but why would a card issuer place a hold on your payment?
A Capital One spokesperson explained, in a very broad overview of such situations, “In the vast majority of cases, funds are made available within 24 to 48 hours of a customer making a payment. In rare circumstances it may take longer depending on the specifics of the situation. We always encourage our customers to reach out to us directly if they are experiencing issues, and would recommend they take steps to ensure that their payments are processed in a timely way by enrolling in autopay and if planning to pay via check, mailing their payment five business days in advance.”
Specifically, payments may be put on hold due to various reasons, such as any suspicions of fraud and concerns about whether the funds can be collected or if there are sufficient funds in a customer’s account to cover the payment.
Large payments, which might be the case if you pay off your entire balance as Karen did, could also invite scrutiny from a lender.
Real-time payments could offer even more relief
Generally, you want your funds to be credited faster so that your credit line is available sooner for you to use. And real-time payments are poised to make this even more of a reality. Fast payments are now available through Visa and Mastercard, and apps such as Zelle, but the actual time the payment goes through could vary.
The Federal Reserve is now working on a real-time payments system that would provide the facility to make instant payments nationwide. It is looking to have this running by 2024. And there is now at least one private system that provides instant payments — The Clearing House’s Real-Time Payments system (RTP) which is owned by some large banks.
The way these innovations are taking off, in the future you will be able to see your payments post instantaneously so that you can continue shopping and using your credit cards without missing a beat.