Why do Financial Transactions post at midnight?


I’ve noticed that transaction from banks, credit cards etc always post at midnight. Why midnight and what’s the whole process from when the transaction gets made?

In: 5

Companies “batch” their transactions overnight. Most do it at that time because it’s a timed process and doesn’t interfere with daytime sales. There will be a hold on your account when you make the transaction but it processes at about midnight-ish

For a credit card transaction, there are two phases: 1) the authorization- this happens when you swipe the card at the store, tell Amazon to use this credit card, etc. When the authorization happens, essentially they are asking the issuing bank “does this account have $X available? If they do, set aside $X for me!” This will show up as an “authorized transaction” on your account, so it lowers your credit limit, but doesn’t actually add to your balance. And at this phase, no money would actually be given to the store by your issuing bank. 2) reconciliation – this is a batch process for all of the transactions run that day at the store. They will tell the issuing bank “remember that authorization we said to hold, yeah we actually want that money now”. That finalizes the transaction for you, actually adds that charge to your balance, and begins the process of the store getting the money from your bank. As I said earlier, this is a batch process. That store will have it kickoff overnight sometime. Midnight is a common time to pick. They don’t have to do it at midnight though, they could just as easily pick 2:38 AM as the time they want to run that process.

Some other fun facts here:

– this whole process is how you can go to a restaurant/bar and get charged for your bill (the authorization) but then add a tip amount which then adjusts the amount being taken out at reconciliation

– when buying things online, the store can authorize your card right away. However they can’t do reconciliation on that charge until they actually ship the item.