Banks: security vs. scam

I have my checking, savings, and HSA at Bank of America. The HSA is a separate department, according to BOA, and not a separate entity. On April 4th, I transferred money from my BOA checking to my HSA to cover my higher-than-expected co-pay on tests and a major surgery. The money was deducted from my checking account but still hasn’t appeared in my HSA. When I inquired, BOA said it takes 5-7 business days “for security reasons” but wouldn’t specify why that would be.

In the digital age, 5-7 business days to ensure funds transferred directly from a BOA checking account to a BOA HSA aren’t fraudulent makes no sense to me. In fact, 5-7 business days to transfer money between banks seems excessive.

Is a 5-7 business day wait pretty standard at all banks?
If this is truly a matter of security, could someone please explain how this works?
Or is it a sort of legal scam where banks get to make money off my money for up to 11 days while we customers have no access to it?

In the digital age, that would be excessive. But banks (at least, American ones) aren’t in the digital age yet. There are still a lot of places in the system that depend on movement of pieces of paper.

Wow, that astonishes me. Go figure.

Thanks for the reply.

Probably not literally pieces of paper. But there is a clearing process that might involves systems and processes that are not connected to each other, or are connected by cobbled together batch processes that require some manual intervention and approval.

I’ve seen a lot of big banks where there are these processes requiring some dude to export a flat file, send it to some other dude who then checks that it is in a valid format, then uploads it to another system.

Hmmm. I can put money into and take money out of my account via PayPal in one day or within a day if I pay a nominal fee (like $2)

Interest rates are so low, only a few pennies could be made loaning out the money overnight. It seems far more likely that the delay is in hopes that you will overdraw and the bank will be able to charge a chunky overdraft fee.

In the UK, where these things “apparently” happen almost instantly, the delay is still there but hidden. Money transferred to me can show up in my account, but if something goes wrong, it can be withdrawn up to five days later. This has been the basis of a common fraud.

HSAs and HRAs (Health Savings Accounts and Health Reimbursement Accounts) are governed by the IRS, so yes Virginia, there is paperwork.

My employer has an HSA administration department that most likely administers my health account as well as my checking and savings accounts, and there is a couple of days between “We’re sending you money” and getting it.

OTOH, on the personal digital money moving side, transfers between different banks are instant with Zelle.

The banks keep the money out of both of your accounts because they can. Antiquated laws from when paper and people had to physically move between locations mean that banks are allowed to take their sweet old time taking the money from one account to another even if it’s not leaving the corporate entity. It very may well be that for “security reasons” there is no direct link between HSA accounts and taxable accounts, and at very least someone has to pull a file to a thumb drive and physically move it to another computer system.

On the other hand, Schwab always makes my money available to trade most things the next day if I get the money transfer request in early enough in the day. They manage to let me trade with the funds while the transaction is still pending according to my bank. The reason for this is that most investments are fairly stable stores of value, and Schwab won’t lose much if for some reason the transfer doesn’t complete correctly and they have to reverse the trades you made. They very explicitly state that you cannot use “cash on hold” to buy penny stocks, options, transfer the money elsewhere, or do anything that requires settled funds, because those funds are not settled yet. I’m sure if Schwab offered Cryptocoins, they’d almost certainly be on the list too, as they are far far more volatile than even the most volatile of stocks not falling under “penny stocks”. That’s fine for a brokerage account, but for bank accounts the main purpose of having them is to transfer the money to other people, not to have it sit in your account and try to make more money for you. They need to be sure that the money is really actually there before letting it go anywhere else. Hopefully you get interest for the time you’re waiting, but rates are so low I don’t think it matters much right now.

The archaic issues behind the banking system is why more of them are teaming up with Zelle, who apparently has a platform in which they can settle things instantly without mucking around in the traditional banking system.