If I want to electronically transfer funds from one bank account to another, it typically takes 3-5 days for the funds to show up on the recipient account.
But if I’m at an ATM, I can withdraw cash from one bank and deposit it right into the other account and that happens immediately.
I guess the two go through separate backend pathways? But why can’t they just make the electronic method equally fast?
Are the accounts at the same bank? If so, I don’t know why it would take so long. With Wells Fargo, you can select to transfer now and it’s instantaneous but that’s between accounts at Wells Fargo.
It takes TEN GODDAMN DAYS. I deposited two checks totaling $10000. $5000 of it was available to me after 5 days. The other $5000 I had to take another five days. What in the ever loving…? You have the routing numbers, the bank account, everything. At the most it should take ONE business day. ONE.
With my bank, Lloyds, electronic transfers from account to account are instantaneous. (Same thing with transfers to a different bank). Seriously, I’d consider switching banks.
The answer is in the complexities of the clearance system.
http://www.cba.ca/en/consumer-information/40-banking-basics/584-cheques-what-you-need-to-know
The essence: until the first institution verifies that the transaction is legitimate, if it gives you the money, it takes the risk. Verification can take a few days. In most cases, for small amounts the bank will take the risk. If the amount is large, it will refuse to take the risk and make you wait.
In Canada at least, the maximum hold period for “most” cheques is four days, allegedly. I’m guessing that a longer hold will apply if the transaction is unusual or for a large amount.
Your question is different than the OP’s. And the answer to your question is that it doesn’t take that long for the funds to be transferred between banks, it’s that your bank doesn’t trust you with $10,000.
They want to allow some time for the person on whose account the checks were purportedly drawn to say “Hey! I didn’t write that check” or “Hey! That check was altered!” or “Hey! That isn’t the endorsement of the real payee!”
Check clearing works on a send-and-pray basis. The bank where you deposit the check sends it to the clearing house. If it gets to the clearing house by the daily cutoff, the amount of the check is credited to the clearing account of the bank that accepted it and debited from the clearing account of the bank against which it was written, both on the next business day. Your bank gets to keep the money as long as nobody complains. If the drawee bank has a problem with the check, they do the reverse process to send it back and the accounts get credited/debited in reverse.
Of course, the check could come back after 10 days. But there are laws and banking regulations about the maximum hold times that they can put on a check and they have to draw a balance between security and utility.
The problem is the fear that if they give you $10,000 and you spend it all the next day, if the check comes back 9 days later you’ll say to the bank “Too bad. I’m broke. I can’t pay you back.”
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I guess the two go through separate backend pathways? But why can’t they just make the electronic method equally fast?
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They do go through separate paths. One is transmitting numbers from one bank to another through either Fedwire or ACH/SWIFT. Your transfer is probably going to be piled up in a batch with other transfers from Bank A to Bank B, and will be processed overnight.
The delay in clearing is primarily a matter of trust, rather than technology. Think of it this way - If you sell your car to someone, will you cheerfully give them the keys on their say-so that they’ve mailed a box of cash to your bank? Probably not. It’s pretty much the same with the electronic transfer, and there are lots of moving parts behind the scenes.
The alternate scenario clears immediately because you’re pulling cash from one bank and giving cash to the other. The ATM detects and counts the cash on the spot, so there’s no overnight transmission cycles, batches, trust issues, etc.
I understand all of this. What I am saying, is there is no excuse in this day and age, that all of this can’t be switched to electronic. I can check my balance any day I want. Why can’t the bank?
Transferring takes a ridiculous amount of time, too, from different banks. Not as much as this, but it’s stupid and annoying.
If your bank is taking that long to do an ACH transfer, shop for a better bank. I have accounts at several banks where ACH transfers can be completed on the next business day. Also, have you ever noticed that when you pay your credit card (or other bill) online, the money can be deducted from your account (even at another bank) the next day? They use the same pathway.
As for the ATM, yes it uses a different pathway. Notice that the owner of the ATM has to stock it with $20 bills. That is money that sits in the ATM not earning interest until somebody comes and picks it up. They probably also have to keep a large stock of $20 bills in the vault, not earning interest, so they can quickly replenish the ATM if needed. It costs them to stock the ATM. Every time you make a withdrawal from an ATM, the bank that issued your ATM card pays the owner of the ATM a couple of bucks, plus the owner of the ATM probably charges you $5 or so directly. So they are not doing this as a public service. Obviously, if the bank that owns the ATM is the same as the bank that issued the ATM card, they don’t get paid, but it still cuts down on the cost of doing business (since they don’t have to keep the lobby open or pay tellers) and encourages people to become customers of that bank.
And you’ll also notice that most banks of a limit of a few hundred dollars a day on ATM transactions. It’s more of a convenience service than a means of serious money movement.
On the other hand, transfers between accounts can be in the thousands or even hundreds of thousands of dollars. Banks don’t want to be paying $7 per transaction to each other and they don’t want to keep massive amounts of money sitting in clearing accounts, not earning interest, just in case somebody wants to do a transfer to another bank. The ACH system (which is usually used for transfers between banks for consumer accounts) is a batch system that settles once per day. (Technically 3 times per day, but I just want this to be high-level.) The cash management department of the bank comes in in the morning, looks at its reports and says “We have a net outflow of $1 million due to settle today” and they scramble to put $1 million in their clearing accounts. (They may borrow, transfer from other accounts, etc.) And each transaction costs a few cents, not a few dollars.
If your bank is making you wait 3 to 5 days to do a transfer, they are profiting off the float and easing their cash management. No other reason.
Almost all checks are processed electronically today. Check21 was slow to take off but it’s mostly taken over the check clearing process today. Your bank probably had the $10,000 in its account the next business day. They just weren’t ready to share it with you.
The slow part is waiting for the person against whose account the check was written to notice that you changed the check for $1000 to a check for $10,000.
And if you are thinking of realtime clearing and settlement, while that is technologically possible, it would wreak havoc with banks’ cash management.
You are explaining so kindly and gently! I hate banks, if I am perfectly honest, even though all of the banks I do business with are hometown banks (two credit unions and one regular banking institution.) Thank you for all of this, I know it but it was still nice to whine. 
I’m reminded by this thread of this old Straight Dope article, especially this line:
In other words they want to keep your money as long as possible, so they’ll drag their feet as long as they can legally get away with on making your money available.
Paypal has an interesting procedure. If you transfer funds from bank to your Paypal account, it will take about 4 business days, every time. But if you pay for something online with your Paypal balance, and the balance isn’t sufficient to cover the entire amount, the transfer from the same bank takes a few seconds, every time. So they have the capability to do it instantly, they just choose not to.
Even more incredible, how do they get away with charging 35 bucks to do it?
I can transfer funds to you by PayPal in seconds, no charge.
My suspicion is that part of the delay is intentional. The transferred amount is debited to the sender’s account immediately, but credited to the recipient’s account with a delay. Result: You’ve given the bank the bank an interest-free loan (referred to as a float) for a couple of days. Doesn’t sound like much, but if you do it with many transfers of many customers totalling many millions of dollars over the course of a year, then - in a financial market where money is, in fact, lent overnight at an interest rate - the benefit is non-negligible.
This was the original funding mechanism for Paypal. They gave you a free payment system, no fees. In return, you lent them money for one (?) day.
I don’t use Paypal and I don’t follow the company. I don’t know how they make a profit today.
In some cases, there are statutory limitations on how fast you are allowed to go. This reduces instability in the financial system. The limitations were not necessarily created for that reason, but it is a reason why they are not removed.
I’ve been out of finance for a long time. I don’t know what statutory limitations there are today.
Banks don’t allow you access to your money until they absolutely have to, in order to cut down on the amount of money they have on hand immediately to satisfy customers and other banks. They would rather have all their money in investments that are earning a return, and so make it a policy to wait as long as they are allowed before releasing funds into your account, such that when it’s done over all the customers the bank has, the amount of money in investment income from not having to have the cash laying around is greater than the amount of money that they lose from people taking their business elsewhere because of delays in the availability of funds. The latter amount is insignificant as everyone follows the same practice, and there isn’t a significant market for people willing to pay larger fees or have worse services offered in exchange for getting their transactions cleared slightly faster.
Anything that has to do with companies makes them money. They charge fees for purchases etc.
Because ACH Transfers are free at many banks ($3 at Wells Fargo). But they would much prefer that you use their wire transfer method – that is done & confirmed back within 30 minutes – but they charge you a $30 fee.
Why would the bank want to make the $3 process faster when it competes with their $30 process?