Why don't bank credits/debits post instantly?

September 3, 2011 2:32 PM

Why don't bank credits/debits post instantly?

That's about the whole question. (US-centric) I just transferred money between two of my own personal accounts with Chase Bank. Why do the transfers take several days to go through? Also, looking at what's waiting to post, why don't electronic transfers from other sources (the gas I bought yesterday, or the puppy vaccine from this morning) post? It seems to me (which is why I ask the question) that if you have the information, there's no sense to wait...

Thank you.

posted by Seeba to Technology (17 answers total)

Many banks do instant transfers between the accounts you hold with them (e.g., checking and savings). Even my tiny local credit union offers this. Who knows why Chase is so far behind the times?

ACH transfers are done in big batches, I believe, so moving money between banks takes a little longer.
posted by philokalia at 2:42 PM on September 3, 2011

I usually joke that banks are collecting interesting on everyone else money for a few days. This might be partly true. In my Swedish bank, transfers from my account to another one of my accounts is = seconds. I do over the web or phone, presto. Money is there. If my mother who uses the same bank pops me money via the phone, I have it within a minute. It's only when it's coming from different bank that it may take up to three days. Overseas takes 3 days +. All of these transactions used to take longer (even between accounts within my own bank) ten years ago.
posted by dabitch at 2:43 PM on September 3, 2011 [1 favorite]

Well, as a partial answer, most credit card purchases don' involve an instant transaction. They're kind of "buffered," in that a retailer will wait several days before sending a large batch of all the transactions. When you swipe your credit card the system is (usually) just checking to see that an account exists, not transmitting all the details of the transaction to the bank.
posted by Patbon at 3:01 PM on September 3, 2011

I have noticed that Trader Joe's purchases don't post until 2 days later (three if you were there on a Sunday). Target and mainstream grocery store purchases post within an hour. Smaller retail locations take even longer to post.

So I'm guessing there's a size component to it. It might be that larger businesses get priority service, or that that there's a fee/transaction size sweet spot that smaller businesses have to wait longer to hit before submitting their charges to the banks. I don't know for sure.
posted by phunniemee at 3:03 PM on September 3, 2011

I have never heard a good technical reason why instantaneous transactions are not possible. There may be impedance mismatches between discrete systems, but in theory there is no good goddamn reason.
posted by jeffamaphone at 3:06 PM on September 3, 2011

A lot of transaction processing is done in batch jobs. So it may not happen immediately, often these things are run nightly.

Transaction processing systems are old, slowly changing code that often still runs on mainframes. (My dad has worked on these systems since the 70s, and it's still COBOL on mainframes). They do make changes and update them, of course, but it's glacial compared to how most software development works.
posted by wildcrdj at 3:26 PM on September 3, 2011 [1 favorite]

On the FI side, to change from a banking system that posts daily to one that posts real-item costs a good deal of money. There is a financial disincentive to switch unless customers really want badly enough that they will leave (they do not want it that badly) or if there is an ATM fraud issue (quite likely and why they do switch.)
posted by michaelh at 3:27 PM on September 3, 2011 [1 favorite]

dabitch has it...ALL banks hang onto their cash as long as they possibly/legally can...the extra interest earned from whatever they've invested their (your) money into, even for a few days, really adds up when multiplied by millions of accounts. also, they're hoping you screw up and overdraft your account...example: you have $200 in the bank. you go out and write 20 $10 checks for i dunno, socks, on monday. tuesday, you check your balance (still $200) and go buy those $200 shoes you wanted. see, now they have a choice of which transaction to put through first: all the little ones, or the one big one. with all the little ones first, you bounce one check for $200 and they charge you $X overdraft fee and with the big check first you just bounced 20 $10 checks and they get to charge you $20X overdraft fee. i'll give you one guess as to which scenario they've programmed their computers for.
posted by sexyrobot at 4:14 PM on September 3, 2011 [8 favorites]

Many banks do instant transfers between the accounts you hold with them (e.g., checking and savings). Even my tiny local credit union offers this. Who knows why Chase is so far behind the times?

Anecdotally, this isn't necessarily a Chase-wide issue. I often do ad-hoc transfers between accounts and I believe they've always posted immediately (or at least they look like they've posted).

ACH transfers are done in big batches, I believe, so moving money between banks takes a little longer.

Yep, and I find this to be annoying and potentially problematic. I do occasional transfers between an online-only bank account and Chase and there is always one day where the money has left one account and not yet appeared in the other account, even when the transaction has been set up days in advance. Where does that money go? I understand the concept of float but this is basically "disappearing" the account holder's money, if only for a day.
posted by fuse theorem at 4:25 PM on September 3, 2011 [1 favorite]

They record withdrawals immediately, just not deposits ( in case your payroll check is made of rubber!)

They do this to sock you with "not enough money in account" fees even though your pay roll check is going to pass their 3 day waiting period.

They Passed some kind of law in the early aughts to recognize the instantaneous results of electronic transactions. But it only works for withdrawals, I'm sure someone better versed than me could say more.
posted by Max Power at 4:29 PM on September 3, 2011

A related, and somewhat forgotten, portion of your answer, regarding what is essentially the scam of the "float" and the hidden fee business that keeps banks profitable.
posted by RJ Reynolds at 4:55 PM on September 3, 2011 [2 favorites]

The float on money they hold makes them a LOT of money. Not so long ago they used to be able to hold some checks for as long as three weeks. You may think how much money could this make for them, but when you are talking about billions of dollars over the course of a year, quite a damn bit.

Until recently they were able to record the withdrawals BEFORE the same day deposits, yet another nefarious action.

lets face it, not nice.
posted by jcworth at 7:25 PM on September 3, 2011 [1 favorite]

Response by poster: Interesting answers. Yah, the question came (and I don't think I put it well in the original question) when I looked at my online bank statement, and there was a list of maybe five-six transactions where the correct amounts were listed, but wouldn't actually take effect (or whatever the term is) until Monday. Not sure why they wouldn't take my money from me immediately - - and the flip side, why my deposit wouldn't be accepted. The floating interest makes a lot of sense.
posted by Seeba at 8:49 PM on September 3, 2011

I use US Bank and transfers between my own accounts are instant.
posted by delmoi at 9:27 PM on September 3, 2011

"banks are collecting interesting " --- damn you autocorrect. Interest, of course. ;)
posted by dabitch at 3:41 AM on September 4, 2011

Because banks are greedy, they can fuck you about as much as they like while holding on to your money, and there's nothing you can do about it.

Finally, finally, banks in the UK are getting round to implementing the 'faster payments' system, whereby electronic transfers should happen on the same day.

This is only happening because the Office of Fair Trading made the banks do it, and they've dragged their feet for years about implementing it.

Note the date of the OFT link above - 2005. Three days ago I got an email from my bank saying: "Good news - we are making the following changes to your account between 15 October and 20 November 2011 - Faster Payments Service (FPS)"

So they could do it in the US, I should imagine, but they can't be arsed.
posted by ComfySofa at 12:10 PM on September 4, 2011

I love the fact that in 20-freaking-11, when just about everything relevant is done by computers over the internet with little or no live human involvement, everything magically grinds to a halt for two days at 4pm Friday. And by 'love' I mean 'despise and am somewhat baffled by'....
posted by FlyingMonkey at 4:49 PM on September 4, 2011 [1 favorite]