Understanding pending transactions: What they mean and how to manage them

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Here’s how pending transactions can happen. Someone taps their debit or credit card at a shop’s terminal or enters the card details online. Then their bank checks the funds and places a hold marking them as pending. Once the shop submits that payment, the funds are finalised and no longer pending.

Given that pending transactions are a common feature of personal finance, people may notice them in a range of situations. Here's more on their purpose and why they're important.

How does a pending transaction work?

A pending transaction is one that has been authorised but not yet fully processed and settled. This means the transaction temporarily affects the cardholder’s account balance. Once the payment is collected by the merchant, the transaction status is complete. This period could last a few days.

Pending transactions may appear on a person’s statement for bank account deposits, credit card purchases and returns, electronic funds transfers, and debit card transactions.

Here’s the step-by-step process of how a transaction moves from start to finish when shopping with a card:

• Transaction. A person taps their card at a cash register terminal, or they key in the card number at a retailer’s online checkout. This triggers the transaction process.

• Authorisation. Next, the bank or card issuer places an authorisation hold on the transaction amount. This hold checks whether the person has enough money in their bank/debit account or credit line to make the purchase. And it temporarily reduces their available balance.

• Pending status. The buyer’s bank/debit account or credit line marks the transaction as pending. This signals that the transaction is recognised. In other words, it has been queued up but not completed.

• Payment submission. The transaction stays pending until the merchant finalises the transaction details and submits them for payment. This involves confirming the amount and sending the final transaction data to their bank or card issuer to request a funds transfer.

• Funds transfer. The person’s bank or card issuer processes the payment request and transfers the funds from the buyer's bank/debit account or credit line to the merchant’s bank. This action completes the transaction.

It’s worth noting that incoming funds can be marked as pending, too. For example, say someone has successfully sought a refund for a coat they bought from an online retailer. When the seller approves the refund, it may initially appear as pending in the shopper’s account before the money is returned.

Examples of pending transactions

Pending transactions are frequently observed in daily financial activities. Common scenarios of pending transactions may include:

• Paying a utility bill. When someone pays their electricity bill online, it may initially show as pending. That’s because the payment needs to be processed by the bank or card issuer and the utility company.

• Paying for subscriptions. Subscription services, such as streaming platforms, might initiate a pending transaction each month as they await payment confirmation.

• Merchant verification. When purchasing items either online or in-store, transactions remain pending until the retailer finalises the charge, which includes verifying it and transferring the funds.

This approach helps businesses and services to manage income and expenses effectively.

How to check pending transactions

It’s best to check accounts regularly to ensure pending transactions are being handled in the right way. For example, here’s how to check the status of a PayPal payment:

• Go to activity and select or search for payment. Filters can also narrow the search by status or transaction type.

• To check payment status on the PayPal app, tap wallet, tap activity, and tap the filters icon to narrow the search by transaction, payment, or date.

Regular monitoring of pending transactions may help with expense tracking. Adopting this personal finance habit can help people better recognise their financial situation.

Manage pending transactions with PayPal

Using PayPal often involves pending transactions. PayPal sometimes needs to put an authorisation hold on funds.

Authorisation holds mark transactions as pending until a merchant finalises payment. PayPal delays such transactions until a product is sent or a service is verified.

This can be checked within a person’s PayPal account and their associated funding source, such as a card or bank account.

PayPal’s security is active during pending transactions, by providing fraud protection

Still, it’s a good idea for people to keep an eye on pending transactions via PayPal. Doing so can help to stay on top of spending and monitor financial activity during checkout with PayPal.