I did an ACH transfer from an account in one bank to another. The money was withdrawn from Bank A on Friday, but isn’t set to be deposited in Bank B’s account until Tuesday.
Where is my money currently?
In: Economics
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Source: I work for a bank. Caveat: It’s a German bank and payment schemes in different countries operate slightly differently.
When you initiate a transfer to a bank account in Bank A, it gets gathered by your bank. All transfers from their customer’s get collected and in regular intervals they send them out to a clearing and settlement mechanism as one batch. This clearing and settlement mechanism then collects all transfers to Bank A from all other banks, puts them into a file and, again in regular intervals, sends these files to Bank A.
There can also be compliance checks that need to be fulfilled and require a human review. In this case, your transfer might park at your bank for a few cycles and gets send to the clearing and settlement mechanism in a later interval.
TLDR: Banks need to verify money wasn’t stolen and a few days is a nice buffer in case it takes a while.
The most important concept to understand, is that banks do not store money as some number in a file, because this would be easy to fake or could be deleted. Rather they store the history of all transactions in and out so they can validate if you really have enough money to withdraw for some purchase. This makes fraud much harder, as you you have to fake a lot more than just one number.
Because of this banks (and credit cards), have a window of time between when a transaction is posted and the bank is 100% sure it is legit. For a transfer between two accounts, the first account gets marked with “-$1000 on Friday at 3:23 pm, Transfer to XXXXXX”, the first bank immediately knows that if this is real, you shouldn’t have access to this money (or you could double-transfer it) so it disappears from your account, and the transaction is marked as “pending”.
The second bank receives a message saying “$1000 into Account XXXXXX on Friday at 3:23 pm”, and spends some time to make sure this money actually came from the other bank and not some faulty or hacked message. This is pretty quick generally but at worst can take a few days if some flags get tripped, so they always give you the worst case. In addition, there may be some data backup or full balance check (sum all the transactions to double check all the accounts are good) that’s happening which will need to happen first.
After both banks have verified this is legit, they finalize the transaction and it gets posted to both accounts transaction history, and the money is moved into the other account.
banks dont have all that money in physical cash, only a very small amount of the numbers are actualy cash, you can just say “its just numbers” for very simple explanation.
So, technically the money is still in your acct & just on hold pending completion of the processing. This makes sure the funds are available when the transfer is actually complete.
It usually takes 1-3 business days to complete, depending majorly on the time & day it’s initiated. Banks usually process these in multiple batches throughout the day. If you do your ACH early enough in the morning (of a biz day), that day may be counted as a biz day.
In your case, Friday wasn’t counted as a business day & your request isn’t actually being started until Monday.
Its not like anyone is moving physical money in this case. Your bank gets your request to transfer say, 2 grand to another bank. So they lock out 2 grand from your account and begin the electronic process. If the bank transfer succeeds they actually remove the money from your account and its placed in the other. If it fails for whatever reason they just release the funds they were reserving back into your account.
Either one of the two involved banks. When you transfer money, your bank will take money out of your account, but they haven’t given it to the other bank yet. During this time, the bank is holding the money in its own accounts. Next, your bank transfers the money to the receiving bank, but the receiving bank holds on to the money for a bit before crediting the receiver’s accounts.
The reasons for this are numerous. Most transfers aren’t instant. There is processing time for batch processes to actually transfer money between banks. There are also fraud protections, so banks take time to verify funds before moving it along the chain. Even some instant transfers are really just the banks crediting customers’ accounts until the funds clear. If you deposit a check into your account and you have the money immediately, really the bank is offer you credit for some or all of the value of the check. If the check clears, you get the rest of the money. If it doesn’t, they take the money from your account and your account might go negative if you already spent the money.
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