Technology is an amazing thing, isn't it? Just think of all the things we can do today that we couldn't do ten years ago... or even just five years ago! With all of this fantastic innovation, why in the world does it take several days to transfer money between bank accounts? Online savings accounts make it possible to earn higher interest than most of your traditional banks, but it comes at a price – waiting anywhere from two to seven business days to receive the money when you transfer it from one account to another.
Debit cards made it possible to withdraw money at the touch of a button (or a few buttons, anyway) – and online account management systems allowed us to view these withdrawals and other transactions in real-time. This makes it even more mind boggling that a transfer between one account and another can take days to complete.
When you transfer money between your online account and your offline account (or even a different online bank account held with a different institution), the money isn't transferring the funds “online” the way you would expect. The transfers move in a series of steps which are slowed down in order to reduce the possibility of fraud. Have you ever seen your money “pending” in your account, but unavailable for withdrawal? It's because all transfers for a bank are done in batches during the day, to an automated clearinghouse. This automated clearinghouse sorts them out and moves them to the receiving bank between two and four hours of being received. The receiving bank gets the transfer within the same day, most of the time! If you are moving money early on a Tuesday morning, you should have it available by Wednesday afternoon. If you've ever transferred money between bank accounts you'll know this is rarely, if ever, the case!
The online banking industry has a “three-day good funds model” policy; where transfers will typically take between two and four days. The banks want to be sure the money is really there and available before it lets the receiver use the money – this is why they don't make the funds available immediately.
It takes even longer when you are making a deposit to one of your accounts. Some banks, including Bank of America charges a $3 fee when you want to transfer funds from your BOA account to another bank – while you can log into your online bank, like ING, and transfer the money into the account from Bank of America for free. But, because ING has to wait until the money clears to know that it's good or not, it will hold that deposit for five business days before they make it available (but you will start to earn interest from the day the transfer takes place.)
Transferring money from Paypal to your bank can take five to seven business days, on average. It's a long time to wait in a world where we're used to everything happening instantly!
Here are some tips for transferring money between one financial institution and another:
- Do money transfers first thing in the morning as they tend to get processed faster.
- If your online account offers check-writing, write yourself a check to deposit into your account of choice – it will clear faster than an online money transfer.
- Open a second account at the same bank – transfers occurring within the same bank will almost always happen the same day they are initiated since there is no need for a different bank to wait and verify the funds are good before processing.
- Consider moving to Europe -their transfers are much faster! Or just wait, since the systems and processes for transferring money are currently being redeveloped in the US (What? More waiting?!)