Phase two of Same-Day ACH recently kicked in. Now, electronic payments or debits you authorize will post to your account the day you authorize them.
With phase one, money got to your account faster, now it goes out faster. What do consumers need to be aware of?
“I don't have a sense that consumers have any control behind the scenes of when this new faster processing method will be used or won't be used. Consumers who are used to paying by check in person may find that their checks clear faster, so they better have enough funds in their account to cover it. Similarly, paying with a debit card may result in the funds being withdrawn from their account on the same day. Again, they should not count on any float time. Checks they deposit in their bank account may also clear faster and thus be available to them sooner. But again, the consumer doesn't control what clearing method the bank may be using,” says Edgar Dworsky, founder of Consumer World.
People should keep in mind the following. There is a $25,000 transaction limit and no international transfers are permitted. Some financial institutions may charge fees for the same-day option. You are restricted to certain time frames in order to qualify for same-day debits. There is a shorter time window to adjust dollar amounts or to cancel an item.
But, there is an upside. “Same-day ACH debit transactions will be most helpful for processing last-minute payments to loans, mortgages and credit cards so that the consumer avoids a late fee or interest charges. These transactions may also be helpful for sending funds for other purchases or to transfer money to another bank account. Before the same-day debit option, consumers would have to pay to wire funds or use standard ACH or bill pay options. Outbound wire transactions can cost between $20-$45 and bill pay options are a slower payment option, especially for first-time payments, which are often sent by paper check,” points out Dana Vas Nunes, senior manager of deposit products at Alliant Credit Union.
Vas Nunes highlights what you most need to know. Ask your financial institution if the transaction they have authorized will be processed as a same-day ACH or a standard ACH debit. Not all financial institutions will offer same-day debit originations. Or, they may offer them at a later date. The legal requirement states that all FIs have to receive same-day debits but are not required to originate at this time.
Pay special attention to the cutoff times for processing same-day ACH debits. Each financial institution may have its own cutoff times to ensure that the debit occurs the same day. Also, recognize that “same day” may mean 5 p.m., which may not be soon enough to make other financial arrangements. Additionally, some financial institutions may charge a fee for the same-day service as the costs to the bank are higher for these transactions. Same-day clearing provides little opportunity to stop or reverse payments once authorized and completed. Expected posting will occur at the end of the business day local time. In March 2018, all financial institutions will be required to complete posting by 5 p.m. local time.
What’s key for managing the new rules? Vas Nunes offers a few tips, “Be sure you know the cutoff times for your payment and your financial institution’s cutoff time for processing same-day debits. Pay careful attention to time zones as well!”
Secondly, she says you need to have the two bank accounts linked before the same-day debit can occur. Each financial institution has its own way of verifying accounts at other institutions. Some use the consumer’s online banking user ID and password and others use a “trial deposit” method for verifying account ownership. She says, “If it’s the latter version, this could take an extra day to process. Be sure to enter the correct account information and loan number. Otherwise, the transfer may be rejected and you may be notified of the rejection after the cutoff time.”