Situation: Money was ACH transferred to a non-existant account by a third party payroll service(not their fault). It took 8 days before it appeared back in the originating account. The receiving bank claimed it doesn’t accept money for a non-existant account, and turns it back the next day at the latest. Payroll Service Comptroller claims that no interest is earned on money by anyone while the money is in transit.
Question: Is it true that money in the process of being transferred earns no interest for anyone?
That would depend on who ‘physically’ has the money during that time. If your* bank was sitting on it, they were earning interest, if the payroll service had it, they may or may not have been earning interest depending on if they keep it in an interest bearing account. I don’t claim to understand all the ins and outs of how the ACH operates, especially when it comes to incorrect account numbers, but I’m guessing the ACH was earning interest during that time.
There’s also the possibility that when the payroll service authorized the transfer, their bank took the money out of their account, but without a correct account number to send it to they may not have been able to get the money into the ACH network. If that was the case the payroll service’s bank was earning interest during that time frame.
*For the purposes of this thread, I’m assuming you were the recipient of the deposit, since I just learned that the person that ultimately gets the money is called the money is the Originator and the person who ‘gives’ the money is the receiver and that seemed confusing.
Wait, just read the wiki article further, sometimes it’s the other way around.
If the payment was coming from a business then it was almost certainly in a non-interest bearing account. The Glass Steagall Act of 1933 prohibits banks from paying interest on business checking accounts.
Do banks make money on money being transferred? I don’'t care about the business account, I just want to know if the banks involved have a vested interested in keeping money in transit as long as allowed by law. Eight days is a long time.