Credit Posting vs. Debit Posting: Understanding Bank Transaction Order

Most lenders post credit prior to debits daily.

Credit posting and debit posting is the recording of transactions in a bank account. Each credit is an addition to the account, while a debit is a reduction from the account.

Significance

Most banks post credits prior to debits each business day, with a cutoff of 2 or 5 p.m. The order in which credits and debits post can greatly affect a bank account holder's balance. If debits are posted first, the account holder may overdraw on his account.

Function

Each credit or debit is a transaction on the customer's account. Each line item increases or decreases the overall balance of the account. To balance an account, the customer must check each listed transaction against his own listing of transactions to see if they match, or balance.

Time Frame

Debits can post throughout the day, whenever one occurs. However, if a credit occurs prior to the bank's cutoff period, the order of transactions is altered and the credit is added to the account prior to the debits reduction.

Considerations

To be a good steward of money, the account holder should note all transactions on an account register and ensure that regardless of the cutoff period, all debits are covered by an equal or greater number of credits.

Misconceptions

Many checking account holders used to "float" checks by writing them prior to making a deposit, assuming that it would take several days for the check to clear the bank. However, with modern electronic banking, many debits occur almost simultaneously to the retail transaction.