Is there any reason (other than the obvious) that it takes a couple of days for a check to be credited to a bank account? Or longer for an out of state check?
Or that even cash deposits aren’t available until the next business day?
Or that it takes 3 to 5 business days to transfer money from an online source like Paypal or ING?
In these days of instant communication and verification, I can’t see any rational reason for there to be any lag time for these things other than the bank wanting to squeeze a couple of extra days of interest from everyone.
My bank is actually really fast on most of those things. Often, when I deposit a check, I ask the teller how soon I can start spending it, and She’ll invariably tell me that it’s in there ‘right now’. Maybe you just need a better bank.
In the US, actual debits and credits take place in batch processes after banking hours. Even purely electronic transactions, like paying a credit card bill from a checking account, happen this way. Typically, the automated clearing house that processes the transactions will execute the debit first, verify that it has your money, and then execute the credit the next night. For transactions involving paper checks, there is still a physical process involved in moving the money around. In the most archaic version of the physical check system, a check that you write has to physically travel (from your payee to the payee’s bank to the closest Fed to the payee to the closest Fed to your bank to your bank) before the money is withdrawn from your account. The same sort of path is travelled by a check that you deposit. The Check 21 act made it legal for recipients of checks to digitize them, eliminating some of the physical travel, but the transactions still take place in batches at night.
And yes, banks and ACHs making money on the float is one reason that this all still happens this way.
[preview]Darnit, Crotalus! Well, anyway…[\preview]
The money should appear in the balance of your account right away. Cash should always be available to be spent right away. Even the cheque should be available to you, but if it bounces from the payors account, then you are on the hook to pay it back.
Typically deposits are electronically filed at the time of the deposit. The papers are bundled up and sent off for manual processing at a ‘clearing house’ that may be part of the bank, or external company. When the clearing house gets the paper, they confirm the details of the cheque and paperwork (deposit slip) to ensure they are in sync, then send a request for a transfer of money from the payors bank to your bank. Their bank will confirm the funds will cover the transfer and process the transfer of money from their account to the payors bank transfer account, then electronically send the funds to your banks receivables account where they then have to transfer it to your account.
Depending on the size of the financial institution and the relationship between yours and theirs, the transfer may happen overnight or take a few days. If it is all paper based then it may take a couple of weeks for everything to be considered complete.
Even the transactions that appear to be instantaneous (account debits) still take overnight to process. Your available balance will be updated, but the actual money transfer between institutions occur overnight.
A major financial instituion will have tens of thousands of computer programs running every night to process tens or hundreds of millions of transactions of various types (deposits, CDs, credit cards, loans, mortgages, etc). It may process all the transactions from day 1 on night 1, send the result file to other FIs on night 2 where they are processed, and the responses received on night 3 and processed for day 4.
Sorry, cantara, but it’s so rare that I actually have the expertise to answer one of these that I had to jump right in.
I would like to clarify that the “purely electronic” transaction I described above involved (in my mind at least) an electronic payment funded by a checking account, not a paper check.
I should also add that when an ACH processes a batch of credits, the recipient companies don’t necessarily immediately post them. When an ACH transmits a batch of credits to your credit card company, the credit card company may, for various reasons, wait hours or days to process those credits.
I don’t know how it is elsewhere but in Sweden if you pay money into a bank account it can take a couple of days before it shows up in the balance. So where has it been in the meantime? The answer is that the bank has borrowed it to lend out to someone and pockets the interest for the loan.