What happens if pending charges total more than my “total available credit”?

Question

I have what I think is an easy question, but I can't find the answer to it either here or through my credit card company's website.

I have an available credit of some amount, let's say $5000. If two separate charges of $3000 go on that credit card, then I will be above my total credit. Theoretically this is bad, but I'm not entirely sure what that means.

My actual question has to do with these charges as they're pending, however. When these charges first go on my card, they are pending for a few days. 1) If, during those few days, I pay off $3000 on my credit card, can I still get in trouble for having had >$5000 in pending charges? 2) If I pay off the $3000 during this period, but this transfer is still pending when both charges go through and are no longer pending, what happens? 3) How about when only one charge goes through before my transfer?

Update - Daniel's answer made sense to me. As to what actually happened: my payment went through several days before the incoming charges went through (so I had a temporary balance of -$3000 on my card) even though both charges were pending before my payment. Even though I had paid off $3k when both charges were pending, I had an available credit of $0, and so couldn't use my credit card for anything else. No extra fees, no long-lasting issues, just a tied-down credit card for several days.

Answer 1

This can be a tricky question, because every bank has its own way of handling such situations.

When a charge is "pending", it means the bank has issued a temporary authorization to a merchant for a charge, but the charge itself hasn't yet been posted. Sometimes that can take several days, during which the charge still shows as "pending", because it's possible the merchant may cancel the transaction or modify the amount of the transaction. This is why most banks will not let you dispute a pending charge. For instance, let's say you make a charge at a store, and that store obtains an authorization for a pending charge against your card. Typically when you dispute a charge, the bank will force a chargeback on the merchant and credit your card back, thus making you whole again. But there's always the possibility that the merchant can still cancel the transaction, which releases the authorization hold, in which case you've benefitted doubly (once when the bank refunded your money and again when the merchant cancels the charge). To prevent this, banks will request that you wait until the pending charge actually posts before they will process a dispute claim (I recently experienced this with my Discover card).

Your bank may have a policy where it will allow authorizations to occur which exceed your credit line, because they are not yet considered actual transactions until the merchant charge is processed. In the scenario you've laid out, whichever merchant posts their transaction first wins, and the second authorization, which would now exceed your limit, could be rejected by the bank when the merchant tries to post it. Your bank may also have a policy for allowing you to go over limit by a certain amount or percentage of your credit limit, but with some very stiff penalties and fees.

To the next leg of your question, your payment may or may not actually post before the merchant transaction, but assuming the two are processed simultaneously, most banks apply credits first and then debits next, so your payment would be posted to your account first, then any charge debits would be applied. This assumes that your payment and one of the two charges are posted at the same time.

Nobody can give you a specific answer outside of you calling your bank to find out what's been received and how it will be posted, because we don't have enough detail (both about your transactions and Bank of America's internal accounting procedures) to give you a definitive answer. Every bank is different.

I hope this helps.

Good luck!

Answer 2

I was tinkering with my utilization. For no other reason than I am a numbers guy, and tinkerer by nature. I have a card whose billing cycle closes today, and wanted to see the impact of having this card, my main card, show zero use. I sent a payment that hit over night.

This situation is similar to the above question, only the result seems a bit different from what OP got. Even though my pending transaction is still pending, the payment free up my credit line. The total line is $20,000. With OP having a different result, Daniel's answer, "every bank has its own way of handling such situations" is spot on. The rest, of course, is excellent background.

For a future experiment, I'd make a payment that's even more than pending, and update here whether the available credit reflects that excess.