Why It Takes So Long in the U.S. to Transfer Money

Last week Logan was in the office and she said, “I transferred money from one bank account I have to another one a few days ago and the money still hasn’t shown up yet. Where is the money right now? Why does it take so long for that money to show up?”

The team at Planet Money answered this question over the weekend: Why does it take so long for Logan to electronically transfer money from one bank account to another bank account? It turns out that when we transfer money, that money transfer goes from one bank to a clearing house like the ACH where it’s then sorted and picked up by another bank (its intended destination). This process takes a few days—sort of like a postal delivery service—and is a system that was put in place in the 1970s. Basically, the reason why it takes so long is because we use an old system with old pipes.

The U.K. also used an old system with old pipes, but after years of complaints, moved to a new banking initiative known as the Faster Payments Service, which made money transfers from banks in the U.K. instantaneous. In the U.K., you can even transfer money on Christmas Day and see it ASAP.

So: Why doesn’t the U.S. do like our British counterparts and move to a faster system? According to Planet Money, the banking community in the U.S. came together to vote for a plan that would provide same-day service (though still not instantaneous service!), and the vote was no (the vote needed a supermajority of 75 percent yeses, and though more than half voted yes, the banks failed to reach a supermajority). The banks were hesitant because it would mean a major overhaul of the U.S. banking system as well as a greater chance of fraud occurring, which means were stuck with what we have for now.

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9 Comments / Post A Comment

sony_b (#225)

I’d like to know what happens to the interest on that money when it’s sitting in the ACH system. I suspect that there’s a middleman there that doesn’t want to lose a cut, and/or the banks on either end.

annev17 (#4,822)

@sony_b As far as I know, the money doesn’t “sit” in a clearing house. The CH just processes the instructions from one bank to the other.

sony_b (#225)

@annev17 Right. So the money is sitting in the banks, not allowing me to make interest on it, and do you think they aren’t? It’s awfully convenient for them, and I bet it’s billions of dollars in revenue for them. Not that banks would do something unethical like that and not tell the reporters that’s the real reason they don’t support it.

/conspiracy theory

annev17 (#4,822)

@sony_b Like I said below, full disclosure, I work for a bank. I can only speak for our Euro systems, not ACH, but I know in our transfer system no one’s making interest on that money while it’s “between accounts”. As far as I can tell from the article, it’s not a conspiracy to make interest on your money, the U.S. system is just outdated and slow. If you find evidence to the contrary though, please link me, I’d be interested to read that.

We might as well just use horse and wagon to deposit our money. I am a small business owner in process of restarting my business. I have done two bank wire transfers on the receiving end the most current February 2014, it is has been day 5 and still no money. My current project is on hold and workers are without pay for it. Oh but all the overdraft(s) will arrive before my wire transfer. Just another racket….

I hate this so much. Why aren’t people more pissed off about this? The amount of outrage people feel over being *denied access to their own money* seemingly pales in comparison to the outrage people used to feel when their Netflix movies took 4 days to arrive.

jfruh (#161)

In 2002 when I moved from California to Maryland, I had all my money in Bank of America checkings and savings accounts. Since there were all kinds of Banks of America branches all over Maryland, I figured all I would have to do was change my address. But no! It turns out that the B of As in Maryland were actually just the recently taken over Bank1s (I think?) and they hadn’t combined any of their back-end processes yet, so they wouldn’t let me change my address to one in the previous Bank1 service area without closing out my old account and opening a new one in the new region. The form this took, as guided by someone in a bank branch, was literally writing a check for several thousand dollars — all the money I had in the world — from my old checking account and then giving it to them to deposit in the new one. Only after I did this was I informed that my money was now in ACH limbo and wouldn’t credit to the new account for several days, even though it was literally going from one part of the same bank to another, which caused me to have a major meltdown right there in the bank, since I had just moved to town as noted and had a number of things I had to do in very short order, all of which required access to money. A manager came out and said soothing words and pressed buttons on the computer and magically my money was available in the new account. I wonder now how he did this?

annev17 (#4,822)

Interesting! I work in payment operations for an European bank, so these transfer/clearing processes are familiar to me, but I didn’t know it took so long in the U.S. In the SEPA zone it’s a relatively fast process, even between banks in different countries.

you want access to your money quick? DONT USE BANKS!!! keep cash and you wont have to worry about access to your money, a crazy concept i know, but you can do it

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