Wednesday, October 12, 2016

Your Money Is About to Get Faster

I've always been bothered by the fact that it takes days to move money between banks electronically and that money doesn't move on weekends or holidays. It's all computerized! Why shouldn't transfers get processed on weekends? It makes no sense and I find it very frustrating.

Two years ago, I wrote about this after hearing a Planet Money podcast on this very issue. The problem is that the Automated Clearing House (ACH) system that banks use was designed 40 years ago. See my previous post for my full rant on this.

Today, I have good news! Finally, the ACH system is getting an upgrade! It is going to take 2 years to fully roll out, but soon, transfers made using the ACH will be completed the same day they were made. Banks which use the ACH will be required to update ACH transactions three times a day, up from the once a day that was previously required. (That updating was usually done during overnight processing, so essentially, the ACH was a "next-day" system.)

Effective now, banks are required to credit an account for money received via the ACH system the same day. A year from now, they will be required to debit money from an account the day the transfer is requested. And finally, in March 2018, all ACH transferred money must be available for withdrawal by the end of the business day. (Currently, there is a limit of $25,000 per day.)

It's still not perfect. It's same day, but not real time. That Planet Money podcast I talked about previously featured a man in London sending money to his daughter overseas. They initiated the transfer on the phone while speaking to the reporter and the daughter verified she got her money within seconds. The new ACH rules don't go so far as to require instantaneous transfers, so we're still lagging the rest of the world, but at least it's a step in the right direction.


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