When transferring money, where is it exactly after it disappears from one account and before it appears in the other?


When I transfer money from my bank account to another, the money disappear immediately from my account but they appear after one or two days in the other account.

Where exactly is my money during this period? Who hosts it? Am I insured against loss? What happens if the the sender’s or the receiver’s bank bankrupts at that exact time?

In: 8

essentially its in the hands of the bank.

unless you pay a premium your transaction gets handled bunched up with other transactions by other people near the end of the day.

in order to smoothen that process it’s blocked/removed from your acc and only reaches the other party once this bunch of transactions is being handled.

if your bank goes bankrupt during that time you’ve usually bigger problems, but then that money should still be counted towards your insured treshold.

Basically, the actual money doesn’t move. Let’s say you have $100 in your bank account. There isn’t a special vault with your name that has a $100 bill in it. There’s a ledger that holds the records that say you have $100, and all the money that people have in the bank is kept together. Now, let’s say you transfer $50 to another account. Instead of physically moving the money, the ledger is simply updated to say you only have $50 left, and someone else’s ledger is updated to say they have $50 more than they did before. The time in between is used to verify all the security precautions that the bank has to do. Make sure the identification you used is correct and real, make sure the recipient is identified correctly, make sure you really have enough to cover it, and a bunch of other complicated stuff.

When it leaves your account it’s in the hands of the banks, either your bank, an intermediary or clearing bank, or the receivers bank. Depending on where in the world this can be for a few seconds to a few days. This is all just “on the books”, no actual physical money moves, it’s all electronic, and the banks agree their position across all transactions at the end of the day.

Insured? Depends again where in the world you are. In the European Union (EU) each country has in their law a consumer protection scheme that protects most accounts up to a certain amount (€100,000 or equivalent, £85,000 in the UK even although no longer in the EU). If a bank goes bankrupt the scheme refunds the consumers, and while it’s mandated by the government it’s funded by the banks. ([Deposit Guarantee Schemes](https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-supervision-and-risk-management/managing-risks-banks-and-financial-institutions/deposit-guarantee-schemes_en)).

>Where exactly is my money during this period? Who hosts it?

Essentially the bank (or transfer service) is “holding” it, while they do paperwork to make sure the transfer is legit and properly documented and everything.

>Am I insured against loss?

It would probably depend on the contract/terms of service with the particular bank or service, but usually yes. Also there’s laws that say like “if you say this is a simple money transfer, that’s a binding contract and you can’t just lose the money. The customer can sue you for their property back.” And if its just between accounts at an FDIC-insured bank, then yeah it’s definitely insured.

>What happens if the the sender’s or the receiver’s bank bankrupts at that exact time?

It would seem unlikely that a bankruptcy could occur so quickly that a transfer could get lost in the 1-2 days it takes to complete. If one or the other bank is going out of business, they would stop allowing/accepting transfers probably weeks if not months before they actually went bust. Any pending transfers would be completed in the few days after they made that announcement, and then no further transfers would be accepted.

The banks m a ke money on your money while it is transit between a and b up two days because its a free window for them to play with tax free money $$$$$$$$$ think how many transactions happen away. And they want a cashless world for fools and suckers? Say no Noone need them its time to blow them off clear the air the world of them?

Imagine two sheets of paper. One is the record of your account. One is the record of the grocery store’s account. You spend $100 at the grocery store, and the grocery store tells the bank.

The bank goes to your sheet of paper and writes “send money to the bank, minus $100”. Then the bank writes on the other sheet of paper “received money from you, plus $100”.

After the bank writes down the “send money to bank, minus $100” message on your ledger, but before they write down “received money from you, plus $100” message on the grocery store’s ledger, the records are not yet meaningful or valid. The accounts are imbalanced. It is an error state that needs correcting and has no real meaning. The bank would find that it has $100 but does not know where it came from, and either you or the grocery store is going to be angry.

Every transaction the bank handles has this same setup: there are two sheets of paper involved, and moving money involves subtracting money off one sheet and adding it to the other one. This system of writing down the record in exactly two places each time is called “double-entry bookkeeping.”

One really cool thing about double-entry bookkeeping is the total value of all the ledgers always add up to exactly zero, which makes it pretty easy to notice this sort of problem immediately.