how come credit card bills can be refunded, i.e if you get scammed the credit card company can reverse the transaction but a bank transaction cannot be reversed?
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Bank transfers can be refunded within a certain period of time.
Credit card companies settle about once a month, which is why it is easy for them to offer that “30 day protection”. Basically they pay their bills and they get their receivables sorted once a month. During this time a fradulent transaction is as easy to stop as you just telling them and them marking it on their books as “don’t pay” or “don’t bill” and they can then figure it out. Credit companies are easily able to do this because they got accounts in many banks or they are a bank themselves. At the end of the day they are just marking money from one book to another and at the end of the banking period (a day, a week, a month, 3 months… whatever…), the books are settled and everyone gets paid what they are supposed to and billed what they must be paid. This is why credit card bill for something that you paid today can come next month, for them it is a non-issue to sort as long as at the end of the banking period all the accounts are settled.
Now why is this harder for basic traditional bank payments? Because banks settle about every 3 days. Put the payment is marked instantly between them. So if you need to cancel a payment, you need to do it right away – and this is what banks advice you to do: contact the bank immidiately so they can just the transfer before the next patch is processed. This can be from 4 hours to 3 days.
When you pay 9,95€ via bank transfer to someone, your bank doesn’t actually pay this instantly. It just marks down on to a ledger that “We need to pay 9,95€ to Bank B” and tell bank B that they are going to pay them 9,95€; meanwhile bank B has a 19,95€ payment it need to do to bank A so they do the same. After the banking day is over both banks settle their books between each other, and money are transferred.
Now you might get the wrong idea about how this works. They don’t actually do small payments like that between each other. They do hundreds of thousands to millions in one go. Which is why they do them every few days. They wait for the payments to accumulate enough to make the work required to handle and verify the payments worthwhile. Small banks might hold on for longer or pay in smaller blacks. With an unified system of communication banks can settle these and make the payments easily. Whatever means is used to do this payment between them, is irrelevant to the customer. They might trade cash, financial instruments, loans, bonds, or sometimes even physical cash or even gold. Most of the cash in the world is actually wrapped in plastic and in cardboard boxes, being carried around from one bank to another. This is to ensure that banks have the correct cash reserves legally required that they need to function.
Basically banks mark their payments and receivables and tally them between each other in real time. However they settle their payments between each other whenever it suits them best. But for your practical purposes the bank payment is instant.
In European banking system, they settle the books 4 times a day. What this means is that 4 times a day, they calculate how much is each bank needs to pay each other. So a payment you made at 6am, get calculated at 9am and show up at the receivers account somewhere around 10am. This is the case for my paycheck, I know my boss makes the payments a around 10pm day before (because I see the time stamp on the tax slip), that means they go to settling at 6-7am on the first patch, and it comes to my account before lunch so at 9-10am.
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