I just started to pay bills online. Today I paid a bill that is due 25 August. I pay this out of my checking account. I expected an instant transfer of funds. But the bank says that the earliest that this bill will be paid is 24 August, three days from now. Why is that? So the bank gets interest free use of the money for those days. It seems neither right nor fair. What if I wanted to wait until the day before it was due?
It normally takes two business days for the debit to happen. And since today is Saturday, the weekend will add two more days. If you had paid it on Friday it would probably still happen on Tuesday.
Ok, but why? The computer knows I have the money in my checking account. It could all happen instantly. Why does it not?
If I wanted to float a check, to overdraw today and put in the money tomorrow, could I safely do that, or would I suddenly find that they tried to take out the money sooner than they said?
Are you paying them through your bank? As in asking your bank to send a check to the place you owe the money to or are you going to the website of the place you owe money to and asking them to withdraw the money from your account?
No, it’s dependent on the company receiving it. My bank visa is same day, my gas supplier is 1 day and my cell phone company is 2 days.
I am going to my banks web site to pay the bills. I am not going to the place where I owe money.
Regarding Magiver’s response, why would any company want to wait even a couple of days. Seems to be in any companies best interest to get the money ASAP.
My bank, Bank of America, does electronic funds transfers to some companies, but in the case of others, it actually prints and mails a paper check.
It’s just a way for the banks to cream some money (interest) from everyone.
The government here in the UK told them to sort it out or they would legislate.
Now I can make any transfer complete the same day.
I have a Bank of America checking account and a Bank of America visa card.
I can pay the Visa card by going into my Bank of America website and doing a transfer from my checking account straight to my credit card account.
Funnily enough, when i do this the money is debited from my checking account immediately, but the payment does not appear on my visa card until the next day.
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That’s standard because the banks are still basically ‘batch’ operations as far as that sort of thing goes.
Obviously, for a bank, security, audit trails, and backup are of supreme importance and a once a day batch system makes that vastly more reliable.
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It also makes it easier to change something. If I make a $2000 payment on my credit card (let’s assume it’s all one bank, one screen, just transferring money). But I meant to put in $200, I can call and have the amount changed. It’s easier to change the amount then to refund the wrong amount back to my bank account (which will take a few days) and withdraw the correct amount.
Credit card machines are like this as well. When you go to a store and swipe your card, all the machine does is get an authorization for that amount (basically, it asks your bank if it can take the money and your bank says "yup, go ahead, here’s an authorization code for you). At the end of the night the machine batches out and sends all those authorizations to the credit card processor and they take care of them from there. Any time between obtaining the authorization and batching out the machine I can go in and edit an amount without much of an issue. After it batches out, errors have to be fixed with an additional transaction (or two) which just makes everything messier.
I just went through this yesterday with my bank. The clearance time is based on the company, not the bank. I don’t know if it’s a function of waiting as it is each companies verification process. Regardless of the reason, it’s not based on the bank or they would all have the same turn-time. My bank was very clear that the days vary from company to company and to note the clearance time next to each account I set up.
I understand why this might be easier if a merchant is involved, as in your second paragraph. But why is it easier when all i’m doing is moving the money from one account run by Bank of America to another account run by Bank of America?
I log in to Bank of America and can see both accounts on a single screen. They clearly know that both accounts are mine; they know how much money is in both accounts.
You realize, i assume, that when i pay my credit card bill with money from my checking account, they don’t actually have someone collect the cash and physically move it from one place to another? All that happens is that they remove $X from one account, and credit $X to another account.
Why is it easier to electronically shift $X from my checking account to my credit card account than it is to electronically move money in the other direction? You say it will “take a few days” to refund money to the checking account after a mistaken transaction. You might be right, but there’s no reason this has to be the case. It’s only the case because that’s what the bank wants.
It’s not that it’s easier…it’s just the way that it’s done.
Money always takes more time to get back into your account. If the bank takes your money today and applies it tomorrow they get to keep that money, interest free for an extra day, while your CC still racks up interest charges for an extra day. That’s one of the driving forces behind banking. Take money ASAP, but take as long as you can to give it back.
If I, a merchant, run your debit card for $20 and then refund $10 the $20 will be debited that day (I’ll get the money 24 to 48 hours later), the $10 will be returned to your account two days at a minimum. This is the reason (for a merchant/consumer transaction) I’d rather edit the transaction before closing then fix it the next day. People get rather upset when a screwed up transaction takes two days to fix and there’s nothing I can do to speed it up at that point.
Well, that’s precisely the point i’ve been aiming at all along.
In your earlier post, you said that “It’s easier to change the amount than to refund the wrong amount back to my bank account.” This implies that there’s actually a procedural or technological barrier that makes it harder for the bank to refund the money. But there isn’t. It’s not actually easier to change the amount than it is to refund the money; it’s just that the bank wants to do it this way for its own benefit.
There’s a difference between “can’t do it this way” and “won’t do it this way.”
Easier for the consumer to change the amount before it’s processed.
Also, if you change the amount before it’s processed it’s only one transaction. After it’s one more transaction (a refund) or two (a refund of the entire amount and a charge for the correct amount). Each transaction costs money so it’s better all around to keep transactions at a minimum.
Can’t vs Won’t…it’s all about the bank making money (they are a business after all).
Thankyou for that penetrating insight. But again, you miss the point.
If it really is easier for the consumer to change the amount before it’s processed, the only reason for this is that the bank wants things this way. The bank could do things differently, but it doesn’t for reasons of self-interest. Which is precisely the point i was making in my first post to this thread. So you have managed to both agree with me and confuse the issue, all at the same time.
I pay my bills online, and I’m occasionally surprised that a bill I paid on the due date managed to make it in with no overdue charges; I think some companies go by the time that I made the online payment; I wouldn’t assume that all companies do, though.
I’ve also processed EFT payments (electronic funds transfers), and they do take a couple of days - the charge comes in to the second institution by fax or email, then someone actually makes the transaction at that end.
Bottom line - it’s probably best to give yourself a couple of days’ grace with online bill paying.
Since paypal can instantly transfer funds from my bank account to someone else (and they do), the technology exists. So if it takes any longer, it’s deliberate delay for financial gain on someone else’s part.
It also saves everyone money in the long run. Extra transactions mean extra charges the bank has to pay (even with all accounts held by the same bank, I assume some money still changes hands. I’d guess at least a certain portion is still handled by a clearing house).
But don’t forget, a bank is a business. They exist to make money. A doctor could cut his patient load in half so you can get in faster, but he/she wants to make more money. The super market could double the amount of cashiers they have, so you wouldn’t have to wait, but that would cost money. Your bank could make transactions happen in one day, but that would cost money. And don’t forget, anything that costs more money ultimately trickles down to the consumer. The doctor would charge more, the items at the supermaket would be more expensive, the banks would have lower interest rates or higher fees.