# Why is banking so slow? **URL:** \ **Category:** Factual Questions\ **Created:** [August 30, 2010, 12:08am UTC](https://boards.straightdope.com/t/why-is-banking-so-slow/551935 "2010-08-30T00:08:33Z")\ **Posts on this page:** 6\ **Page:** 2
**Author:** ![lastsong](https://avatars.discourse-cdn.com/v4/letter/l/e8c25b/32.png) [@lastsong](https://boards.straightdope.com/u/lastsong)\ **Post date:** [August 30, 2010, 11:44pm UTC](https://boards.straightdope.com/t/why-is-banking-so-slow/551935/21 "2010-08-30T23:44:47Z")
As many have said, it is called “float” - the time the bank gets to use your money for free. Back when checks were really handled, you could play games with payments - the routine went like this: You send check to distant entity - the mortgate, a “mail-order” purchase, whatever. The payee deposits your check in their bank Their bank sends your check to the Federal Reserve (yes, really - the Fed does many thinks, account settlement is one of them). The Fed sends your check to your bank NOW your bank knows about that check and dings your account. Note that it could take days for the check to get back to your bank, during which time YOU had the “float” - the money was both in your account and in the payee’s account. Now, the physical check is no longer required to ding the account - an electronic image is all that is required (cleared by the US legal system in the mid-to-late 1980’s). The point being: Any check drawn on a US bank and deposited in a US bank actually clears within 24 hours - and, unless you are dealing with tiny, hick banks, within 4 hours. The laws were written when the paper was required, and a 3-day hold was not unreasonable. The banks kinda like keeping the money for 3-5 days, and it’s legal for them to do so. So they do. I worked on a system in the early 1980’s to settle checks (Reagan’s “anything the government does can/should be done by private entriprise - it is cheaper and more efficient”). for CACHA (California Account Clearng House Association). A truly hilarious case study of how private enterprise can screw up as well as any government institution. ---
**Author:** ![GusNSpot](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gusnspot/32/436_2.png) [@GusNSpot](https://boards.straightdope.com/u/GusNSpot)\ **Post date:** [August 31, 2010, 6:27pm UTC](https://boards.straightdope.com/t/why-is-banking-so-slow/551935/22 "2010-08-31T18:27:33Z")
And you can still use paper checks. Some of the places I pay online through my bank do not have a way to receive electronic money or they do not want to. It is not required by law so my bank actually sends a paper check to them for me. That all has to be done snail mail and paper checks are still sometimes moved to/from the Fed to the other banks physically. I used to fly them at night in small aircraft. (You really do not want to know. ) I would much rather banks to be slow than to have them be hacked and all my money lost. ---
**Author:** ![qpw3141](https://avatars.discourse-cdn.com/v4/letter/q/6bbea6/32.png) [@qpw3141](https://boards.straightdope.com/u/qpw3141)\ **Post date:** [August 31, 2010, 6:33pm UTC](https://boards.straightdope.com/t/why-is-banking-so-slow/551935/23 "2010-08-31T18:33:40Z")
> [@lastsong](#): > > The banks kinda like keeping the money for 3-5 days, and it’s legal for them to do so. > So they do. They liked doing it in the UK, too. But they were threatened with legislation if they didn’t get their act together and speed things up. So now, mainly, they don’t. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [September 1, 2010, 6:00am UTC](https://boards.straightdope.com/t/why-is-banking-so-slow/551935/24 "2010-09-01T06:00:53Z")
> [@footballisplayedwithyourfeet](#): > > Most importantly, all my (and of most of the people I know) banking is done through the internet. I can transfer money, set up new accounts etc. just by logging in. I seriously can’t remember when I last actually spoke to someone at the bank. All monthly payments are set on a periodic transfer, where the bank will automatically transfer the money on the 2nd (or whatever you want) of each month. If I have to pay companies or organisations, they will send me an _Acceptgiro_ which will require me to just fillout the payment number online and it will be paid. I just mention these things because they have made banking so much easier for me and my friend said they are all non existent in Canada. Depends what bank you’re dealing with. I deal with RBC and I have all of those options on-line. I rarely go into a bank to speak to a real person nowadays. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [September 1, 2010, 6:02am UTC](https://boards.straightdope.com/t/why-is-banking-so-slow/551935/25 "2010-09-01T06:02:51Z")
> [@Sunspace](#): > > What we need in Canada is European-style instant ‘push’ transfers from any account to any account. I want to be able to send rent money immediately and have it show up in my landlord’s account, not give a cheque and wait around for the landlord to request the money from my account. We have a workaround via Interac Email Transfer, but that requires that both sender and recipient have email addresses as well as access to online banking with institutions that support the service. I’ve not tried to pay a landlord, but I can pay third parties on-line through my bank, provided the payee has registered to receive on-line payments. ---
**Author:** ![cantara](https://avatars.discourse-cdn.com/v4/letter/c/6f9a4e/32.png) [@cantara](https://boards.straightdope.com/u/cantara)\ **Post date:** [September 1, 2010, 3:41pm UTC](https://boards.straightdope.com/t/why-is-banking-so-slow/551935/26 "2010-09-01T15:41:19Z")
Sorry, this turned out to be long…but I hope it is worth the time invested… The above descriptions of the batch processing are correct. Keep in mind that the banking industry is based on accounting practices where credits and debits must be balanced. Banks will have hundreds of different ledgers and balance sheets depending on the type of business being handled. They must be reconciled with other banks balance sheets as well. Make a withdrawal from your account (teller or own banks ATM). The bank will have cash available in a ‘float’ (cash on hand for this purpose). They will look up your balance, make a debit from your account and credit their float, then remove the cash from their float to give to you. \*\*Interestingly, the DR/CR have been noted in the system and online balances updated but the actual accounting side will occur during the overnight batch processes. \*\*At that the local branch cash is reconciled with the transactions processed locally to the banks overall general ledger. When you make a purchase at a merchant, or withdraw money from another banks ATM (or private ATM for that matter), each institution has the same processes to follow. It adds an extra day of processing since the transactions destined for another bank will be bundled and sent to the other bank (usually through a middleman) during the batch processing as well. Since the merchants bank is asking for the money from the purchasers bank, they send a debit across to them. The merchants bank doesn’t have your money until the credit is recieved from your bank. The banks may have updated the balance online, but the accounting side is the one that counts. If your bank processes a number of outstanding transactions that put your account overdrawn, then they may not pay the merchants bank. Things get complicated when there are different systems and sources all trying to process transactions against your account around the same time. Ever make a deposit and a withdrawal on the same day only to have the withdrawal denied? Could be because the timing of the batch processes was out of sync. Writing cheques becomes a longer process since the paper has to be validated and the transactions processed (described above). Have you seen the [story of the kid who deposited a fake cheque?](http://www.goodthink.com/writing/view_stories.cfm?id=11&page_id=2) He withdrew the money a month later after being told that it was accepted and put it in their own safe deposit box. A couple of months later they wanted it back. Basically he took advantage of the time that it takes for everyone to agree that it is valid. I remember being a 12 year old and figuring out that I could probably write a cheque for $1,000,000 at from bank A to my account at bank B and then back again and keep the interest (this was when my savings account was at 15% interest). The fact that it is called kiting and is illegal dissuaded me from doing so. [Previous page](https://boards.straightdope.com/t/why-is-banking-so-slow/551935.md?page=1)