Hi,
Are credit card transactions between the vendor and banks settled immediately or is there usually a time lag? For instance if I as a customer pay a vendor by credit card does the bank immediately settle its accounts with the vendor I’m paying or does the vendor receive his/her payment later?
I look forward to your feedback
davidmich
Many are done in batches, usually at Midnite. So there could be two delays from the charge to it showing on your balance.
You do know your name is shown on your post, so there’s no need to “sign” it, right?
In our shop (auto repair), we close at 5:00 PM each day, and batch all the credit card payments to the card processor just after that. All the money then magically appears in our bank account first thing next morning. So there is a small delay, but never more than about 12 or so hours.
Way back in the mid-80’s, I took a ski trip and the trip provider said “we take Visa and Mastercard but not American Express.”
I asked him why, and he mentioned it could take (at that time) upt to 90 days to get paid.
IIRC, Visa and MC deposits, I simply deposited the charge slips (in those days with the carbon-copy slips, before electronic) at the night deposit. The bank applied those to my balance right away. Of course, if it was contested, the bank would ahppily deduct the amount out of your account right away too.
Why then is there a one to two week delay between a transaction and the date it posted (sometimes first posted as “pending”)?
Almost all my CC transactions - except some distant foreign ones - seem to be posted the same day or a day after the transaction.
I agree with md2000 that what you describe is actually pretty rare. However, it’s possible for a merchant to authorize your card instantly, which is the credit card processor /issuing bank saying that the charge is approved, and only capture the transactions days later. They wouldn’t be reauthorizing the transaction later, they’d be capturing the funds previously authorized.
A merchant might do this if it’s a custom order and they wait until it’s ready to ship to collect the funds, but verify that the funds are available immediately at time of ordering. (they might also take your money the day they take your order, but only because they can get away with doing that).
Settling payments between banks has long been a ‘bone of contention’. In the past banks have been rather too fond of holding onto peoples money for an unreasonable amount of time, often days. The suspicion was they did this for financial rather than technical reasons.
In recent years there has been a lot of regulatory pressure on banks to get it down to a target of one day across the EU. Some countries do it in 30 minutes. It is heading the right direction. I daresay there are a few laggards out there.
As others have said, it’s done in batches and how long it takes the batch to be processed varies by days depending on the store and the day of the week the transaction happened on. For example, many times Friday or weekend transactions don’t get posted until Monday.
In the UK my Mastercard & Visa payments currently take 2 working days. I haven’t checked Amex.
A few years ago they all used to take 4 or 5 days, so things have improved quite a lot.
This is what led in 2008 to the near-meltdown of the system. With so many financial institutions an their big customers possibly invested in mortgage-backed junk, no bank was sure a fellow bank was solvent enough to settle their debts from day to day. If A cashes a cheque drawn on B, they hand out cash with the assurance that overnight A and B will settle the differences. Ditto for credit card transactions. If the central bank hadn’t jumped in to guarantee these transactions, the system would have ground to a halt.
Sometimes merchants pay a higher fee if they don’t settle their transactions promptly (within a day usually). I find it’s typically the smaller merchants who occasionally wait a few days to settle.
Thank you all very much.
davidmich
Crotalus is an expert in this stuff; I’ll point this thread out to him…
Hotels do this. When you check in, they get a pre-authorization for the estimated amount of your stay, but they don’t formally charge the card until you check out.
Some people will pay cash when they check out, and then scream at the hotel because they have a bunch of unused authorizations tying up their credit line. (If this happens, call the bank that issued the card. They are the ones that have to release the unused authorizations.) Or they will use a debit card with just enough money to cover their room bill, and then skip out without paying their restaurant and movie tab.