About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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New Internet Banks Often Neglect ACH Transfers - Why This Is a Mistake

I've recently come across some banks that have started internet divisions with online savings accounts. The rates are above average, but they are not great. So I'm not in a hurry to post on them. Also, I'm not having an easy time learning about the banks' ACH transfer systems. They have little documentation on their websites, and when I contact their customer service, the CSRs have trouble providing more details. This reminds me of a common problem that I've seen over the years with new internet banks. They neglect their ACH transfer capability.

Since you can't go to a branch to deposit or withdraw money, the ACH transfer capability of an internet bank is very important. It's also one of the most overlooked features. Many internet banks provide little information on these features.

Overview of ACH Transfers

If you don't have a lot of experience with internet banking, you might not be familiar with ACH transfers. ACH stands for Automated Clearing House, and it's an electronic network for financial transactions in the U.S. Direct deposit is one of the best known transactions that is done via ACH. An ACH transfer may also be called an electronic funds transfer (EFT).

An internet bank should allow customers to log into their accounts and initiate bank-to-bank transfers via ACH. For example, if you deposited a check into your checking account at your local bank, you should be able to log into your internet bank account and initiate an ACH transfer from your local checking account into your internet account (pulling funds from your local bank). Likewise, if you need money at your local bank, you should be able to log into your internet bank and initiate an ACH transfer to your local bank account (pushing funds to your local bank).

If an internet bank doesn't offer ACH transfers, making deposits and withdrawals probably won't be easy. You might have to mail checks for deposit, or you may have to do a wire transfer which may require faxing forms and/or phone calls. Also, wire transfers for outgoing transfers most always have fees.

Important ACH Transfer Features

Even if an internet bank has an ACH transfer capability, you might still experience problems when you try to initiate transfers. This is why it's important for internet banks to provide clear documentation describing their ACH transfer features. If you're trying to choose a new internet bank, the ACH transfer features should be a major criteria in your decision. Below are a few of the important ACH features that an internet bank should clearly disclose:

  1. How Links are Established - A link for an ACH transfer is a connection to an external account. This is typically done before you can initiate an ACH transfer. The typical process for establishing a link is to specify your bank's routing and account number. Trial deposits are sent to the external bank account. You then have to verify the trial deposits by entering the deposit amounts. This proves to the internet bank that you own the external account. Some internet banks require this to be done at least twice: once when you initially fund the account and again after the account is established.
  2. How Many Links Are Allowed - Many internet banks restrict the number of links to your external accounts. If you hit the limit and you need to add a new link, you'll first have to delete an existing link. So if the bank has a small limit, it should make it easy to delete links.
  3. Type of Accounts That Can Be Linked To - Ideally, the internet bank should allow you to link to checking accounts, savings accounts and brokerage accounts. Some internet banks limit linking to just checking accounts.
  4. Cost to Initiate ACH Transfers - ACH transfers should be free. I've seen some banks that have a fee for outgoing transfers.
  5. Dollar Transfer Limits - This is the maximum dollar amount that can be transferred. Banks often have different limits for deposits and withdrawals. There are often limits for a single day and limits for a month. Banks sometimes limit this to small amounts. For example, one internet bank has a limit of $10,000 transferred out per day.
  6. Restrictions on the Number of Deposits and Withdrawals - All savings and money market accounts limit withdrawals via ACH to a maximum of six per month. If you go above this number, you will likely be hit with a fee. This is due to federal regulation. However, some banks place additional restrictions.
  7. Allow ACH Deposits/Withdrawals Initiated from Other Banks - If a bank's ACH capability is weak, you may have an easier time to initiate transfers from another internet bank. Most banks allow ACH deposits and withdrawals that you initiate from your other banks. Some have restrictions.
  8. Hold Times - When you make an ACH deposit, the hold time is how many days it will take before those funds are available. During the hold time, the money is typically earning interest, but it's frozen, and it can't be withdrawn.
  9. Speed of ACH Transfers - Some banks can take three or more business days between the time you initiate the transfer and the time that the money is credited to the destination account. Some banks can transfer as fast as one day. If a bank mentions the transfer time, it will often list a range of time for the transfers or the worst case time. So it's hard to know the true speed until you use it.

Some banks say they have low limits or restrictions on ACH transfers for security reasons. Sometimes they will increase limits for long-time customers or on a case-by-case basis. These limits and restrictions are usually just on ACH transfers initiated from that bank. ACH transfers initiated from another bank usually have fewer restrictions. This is due to how liability is assigned in the ACH system. The bank that initiates the ACH transfer is the one liable for the ACH. If an ACH is received by a bank, regulations allow that bank to reverse the transaction within 60 days.

Regardless of the reason why internet banks have low limits and restrictions on ACH transfers, they should ensure the limits and restrictions are clearly documented so customers aren't surprised by the delay and cost when they want to withdraw their money.

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  |     |   Comment #1
Good points and info. One thing I would add that I have experienced occurs when opening a new account by ACH. Some banks will take your funds but then not credit or pay interest for up to a week. They have your money.....but dont credit your account. When I have complained about this......they play dumb and then claim the money is lost in the Bizzaro,Never-Never Land of ACH transfers. Reality is that they have your money and are earning interest themselves on it while claiming it's "policy".....or that they must "hold" the funds. To be fair though.....other banks have given me credit same day I opened the account. Just be careful of this and demand to know prior to opening an account.
  |     |   Comment #8
The remarks by #2 are totally uncalled for.
  |     |   Comment #9
All I can say is "Sorry, Ken.  Your hard work is appreciated."

  |     |   Comment #12
Thank you, Ken.  That is an excellent ACH tutorial.

I can sum up my own ACH situation with few words.  I do tens of ACH money moves each month involving many financial institutions.  Were it not for my Alliant hub account I would be so incredibly out of luck.  I am completely and totally reliant . . on Alliant.  
  |     |   Comment #13


Dear Mr Tumin,

I've found that ACH fund transfer systems offered by Air Force FCU,  and by USAA are very efficient.  USAA's ACH system has a feature, where it allows transfers from their bank, and also from their brokerage.

Yours Truly,
- Anonymous
  |     |   Comment #15
Suggestion:  When you open a CD by means of ACH, consider whether you should also open a savings account for one dollar.  The reason is that some online banks will say that when a CD matures they cannot send you the principal by ACH because a CD is not a "transactional" account.  But if you have a savings account there, then you can have them put the proceeds from a maturing CD into the savings account, and then transfer from the savings account to an outside bank.  Otherwise you might have to get a paper check for $100,000 in the mail!  By opening the savings account at the same time you open the CD, you avoid a fee for closing a savings account too soon after opening it.
  |     |   Comment #16
Pua:  How does opening a savings account at the same time help with getting the matured CD funds?  Many institutions I deal with state I have to return the CD to them in order to receive the funds.  Do you still have to return CD at maturity and just request that they deposit funds in your savings account?  Thanks.
  |     |   Comment #17
To Anon. #16: During the past 4 years I have held CDs at perhaps ten different online banks.  None of them has sent me an old-fashioned paper CD, and therefore I have never had to turn in a paper CD in order to get the principal back.  A couple of them required an old-fashioned signature card through snail mail; but in the end I never actually had to put my signature on any piece of paper other than the original signature card.  They are willing to accept instructions by snail mail, but they all have internal e-mail where you log into your online account by using your password and then you can send a "secure e-mail" which stays inside the bank's own website; and they will execute whatever requests you make in that way.
  |     |   Comment #18
pua:  I have never held CDs with online banks because of concern about how they worked.  Thank you so much for explaining their procedure.  It does not sound complicated at all and really seems more secure than I thought.  Much appreciation.    #16

Internet Banker
  |     |   Comment #19
Regarding the issue of delayed ACH credit into accounts.  Most banks use what is known as a "good funds" model for ACH transactions.  This means that the credit leg of the transaction is not released until the return window on the debit leg of the transaction has closed.  An account with an NSF, or multiple other reasons, may be systemically reversed by the Recieving Depository FI(RDFI).  The bank that originated the transaction, (ODFI) would be out of the amount of the reversal if they had released the credit leg and the customer withdrew the funds.  Banks prevent this easy fraud behavior by holding the funds for 48-72 hours.  Banks do not hold funds in order to earn the interest on the money - in fact none of the banks that I am familiar with (2 of the top 4 banks in the US) earn any interest on these funds.
William Ball
  |     |   Comment #20
Discover Bank is one of the worst on holding ACH transfers.  Whereas USAA, most credit unions and even Chase post incoming ACH transfers in realtime, Discover only posts transactions on the business day following the business day the funds are received.  For example, if you ACH funds from your bank account at, say, USAA on Friday morning, the money will post to Chase on Saturday at 12:01 am.  It will post at most credit unions about 5 am on Saturday morning.  But at Discover Bank it will post on Tuesday morning around 9 am. 
They also have very long hold times on all checks deposited. 
For an Internet bank where you expect convenience and flexibility in moving and having access to your funds, Discover Bank sucks.  
  |     |   Comment #21
Synchrony bank has taken a large deposit for a new CD without one single trial deposit. It has caused me a great deal of concern as to how this bank does business. I have confirmation from the bank from which the deposit was initiated yet nothing has shown up in the Synchrony bank account for 2 days.
Monday morning, I intend to cancel this transaction and ask for the return of my funds. When applying for this cd, they indicated that there would be 2 trial deposits. This did not happen. Why should I trust them now? If anyone can shed some light on this, I would appreciate it.
  |     |   Comment #23
This is an older post so realize there might not be many viewers of the thread.
If I should post a new thread, which forum category should it be in.

on the topic of the post - ACH transfers and bank policies:

At synchrony bank
The hold times for new accounts (first 30 days) of a bank I am considering - related to ACH transfers
into the bank -- those hold times seem very excessive - 45 days.

Here is a quote from the account agreement at
https://www.synchronybank.com/sites/syf ... 009913.pdf

bottom of page 13 above Arbitration section - the second bullet item below

New Account Rules – if you are a new customer (you do not have any pre-existing bank deposit accounts with the Bank), the following rules will apply during the first 30 days following the date of your first deposit:
• Funds from checks deposited into the account of a new customer will be available on the sixth Business Day after the Business Day we receive the deposit.
• If you fund your account with an initial deposit made by ACH transfer from another financial institution, the types of withdrawals you can make are restricted for the first 45 days

I am referring to opening just a fdic insured savings or money market acct - not a CD.

I've heard 3 different explanations from the bank about it - and it seemd they were struggling
with what they were saying even in the same conversation:
a. one said that the section is out of date and to ignore it
b. one said that it is very much in effect and applies to any ach during that time, not just the initial deposit
c. that it applies to just the initial deposit if that is ach, but otherwise would not apply

In any case, I need to assume that 45 days could be the hold time and accept that.

But doesn't that seem excessive ? (for money that comes via ach
from other institution ?

I don't know if the negative comments about that bank I see on this site
under user reviews relate to that or just other things but there sure
are a lot of negative comments, though there are a lot of positive ones also.

Perhaps I just need to open account with a small check and wait 30 days
to ACH, or just try to find another bank.
(not doing online banking does limit me so need to use banks
that, like Synchony claimed, lets me do most things on phone
and/or by mail.
  |     |   Comment #24
I have a question on this subject. Other than calling every bank and/or credit union we have CDs with, is there any way to find out from their internet webpage if they will ACH our interest checks to our local checking account instead of mailing it to us?. In winter it can be a hassle to go so many times to our local bank to cash or deposit the separate checks which come in the mail. Thanks.
  |     |   Comment #26
paoli2 #24
been wondering why you haven't posted here in a while.
alive and hopefully well . must have found a new hangout.
couple of good CD deals have passed by you might have liked ..
nothing changed here.
  |     |   Comment #28
While this article is now quite dated it is still very relevant. One feature I would like to see on Deposit Accounts website is answers to a some of the ACH features mentioned above shown in the features section. Very rarely do online banks disclose anything other than rates and fees. The other particulars can only be found out after opening an account, reading others comments on the account or reach out to each bank and waiting for a response. Most important to me in order are:

Dollar Transfer Limits
Speed of ACH Transfers
Restrictions on the Number of transfers
Hold Times

Most online banks offer ACH, however typically the top ten highest rate paying banks do not offer same or next day ACH and are limited to standard 3 or even 4 day speeds. Many also limit dollar amounts for ACHs they originate. Now that interest rates are greater than 3.5% for many online banks if transferring significant amounts, it starts to make more sense to pay for wires rather than performing standard ACH transfers depending on the wire transfer fees. This info would be great to have up front and contacting all the banks to find out takes too much time.
  |     |   Comment #30
Why do some banks offer way higher ach withdrawal limits than others? For instance, Citbank offers 250K+ ach transfer out limits while Bread Financial offers 5k daily and 30k monthly, what gives? How come CITBank is not concerned about security?
  |     |   Comment #31
Citi is not CITBank nor vice versa. Why should Citi care about its security…it’s not its money! How does the capital, etc of each compare?

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