Lengthy ACH money transfer: necessary, obsolete or con procedure

[MJ]

I alway wonder if anyone is making money on my money when I do an ACH (automated clearing house) transfer.
When you do an ACH transfer the money leaves your outgoing account and may take 1 to 4 additional days (delayed by weekends or holidays) to finally reach your incoming account. The banks swear up and down that they don't make any money. It is hard to believe in this capitalistic society that the billions of dollars that haven't reached the final destination aren't earning someone money. When I do an ACH with EmigrantDirect and ING during the week, I lose only 1 day of interest but with HSBC, I lose 2 days, so for HSBC, I try to do the ACH Mon or Tues or i'd lose 4 days of interest.

Any thoughts

[Leonidas]

That is an interesting question. I couldn’t find anything that directly addresses your question, but I did find some things that talk about how the transfer process works.

It seems that when your bank (or any Depository Financial Institution) receives the request to make a transfer through ACH from a billing service they will debit your account and send the info to the ACH operator. The money is still in your account, but is not available to you and is flagged as a pending ACH transfer. The ACH operator makes the ledger entries and notifies the receiving bank. On the receiving end they will credit the receiving account but the money will not be available and is flagged as a pending ACH transfer. At this point no money has actually changed hands. Once the availability of funds is verified each institution debits and credits the appropriate accounts the money is actually transferred – they call this “settling” or “final settlement day”.

From what I read at the Federal Reserve’s website, the settling process is where the receiving institution takes a risk and the process is supposed to be “close” to a wire transfer but not quite the same thing. It appears that the ACH system acts as a go-between to coordinate the transfer of funds, but the banks do the actual transfers in a different system (fedwire maybe?).

They say that the money is still in your account, but unavailable. That sounds similar to what happens when you get certified funds in the form of a cashier’s check. The money is still there until the check clears, but your available balance is reduced by the amount of the check. The payee can deposit the check and his balance is credited by that amount, but the process can still be reversed if there is fraud involved (like a counterfeit check). What happens to your money in the case of a cashier's check waiting to be cashed? I thought the bank certified those funds with their money (that's why they debit your account - they moved it to their account pending the actual transfer of funds to the receiving bank). Don't banks invest their short term cash somewhere? I agree with you, somebody has to be making money off of this.

[cute fuzzy bunny]

I forget who told me this, so hey, its unsourced info and you know what that means...

Banks have some rules around money transfers and check cashing. The longer they have the money but havent actually put it somewhere they have to start paying interest on, its their money to earn float off of. It takes under an hour to do an ACH and for domestic banks, not much longer than that to verify and pay a check. The rest of the time it takes is earning the banks a few pennies here and there and will be used to the extent allowable by law.

[razztazz]

There's 2 things you can be sure of:

1) Somebody IS making money off you

2) They are lying about it

[maddythebeagle]

When I do an ACH with EmigrantDirect and ING during the week, I lose only 1 day of interest but with HSBC, I lose 2 days, so for HSBC, I try to do the ACH Mon or Tues or i'd lose 4 days of interest.

yep, hsbc is slow and most of these are only good for longer term savings and not moving often...

[dmpi]

Between the 2 day transfer and the weekly sweep, my broker made plenty of money off me. I got to time it just right or I can lose up to 5 days of interest.

[MJ]

Originally Posted by Cute Fuzzy Bunny

It takes under an hour to do an ACH and for domestic banks, not much longer than that to verify and pay a check.

I have been using treasury direct and every Thursday morning, I do transfer (I am assuming they do ACHs as well) of the left over interest to my bank and it appears in my bank account by the following morning. This time I forgot and did it about 10PM and it still got transfered into my account the next morning so I know it can move very quickly. Surprisingly, the feds are doing something right for a change.

[TromboneAl]

I've wondered about this too. I'm assuming that no human beings are actually involved in the transfer, unless something isn't right. That is, unless the computer finds something and needs to flag it for human attention, the entire process is computerized.

If that's true, making some conservative estimates on time, how long should it take:

Check for funds availability: 27 milliseconds
Contact other bank, and do security: 350 milliseconds
Other transfer of information: 200 milliseconds
Other stuff: 82 milliseconds

Total Time: Less than one second

Actual Time: Three days.

So it takes about 86,000 times longer than it needs to.

[Texas Proud]

Originally Posted by TromboneAl

I've wondered about this too.* I'm assuming that no human beings are actually involved in the transfer, unless something isn't right.* That is, unless the computer finds something and needs to flag it for human attention, the entire process is computerized.

If that's true, making some conservative estimates on time, how long should it take:

Check for funds availability: 27 milliseconds
Contact other bank, and do security: 350 milliseconds
Other transfer of information: 200 milliseconds
Other stuff: 82 milliseconds

Total Time: Less than one second

Actual Time: Three days.

So it takes about 86,000 times longer than it needs to.

This is from what I have been told... no direct knowledge except working in a bank...

First... the bank is 'making money' on all funds that is not in an account... it is their float... but they say they are not making money off YOU, because there are not fees... and nobody can 'find' your money... money is fungable..

Next... all ACH transfers are done at night.. the bank does thier tape and sends it to the clearing house where it is match with other banks tapes.. it is NOT an instant kind of transfer...

If you want to move money quickly.. you send a wire.. but even that takes time for the receiving bank to indentify which account to put the money... but usually they can find the money quickly if you call.. (ie, yes we have received the wire)..