Why Is ACH Slower At Some Places Than Others?

ACH stands for Automated Clearing House. It’s low-cost method to move money from one account to another. When you have payroll direct deposit, it’s done by ACH. When you give your bank account to an insurance company for automatic monthly payments, it’s done by ACH. When you transfer money from a checking account to an online savings account or to a brokerage account, it’s done by ACH. ACH is everywhere.

ACH transfers take longer at some places than others. When I transfer money from Fidelity to my checking account, I see the money the next day. When I do the same from Vanguard, it takes two days. When I do it from E*Trade, it sometimes takes three days. Why is that?

ACH supports both credits and debits. You can ask one institution to move money to another institution (credit, or “push”) or you can ask it to get money from another institution (debit, or “pull”).

Whether it’s an ACH credit or an ACH debit, the institution at which you request the ACH transfer always takes the lead. It’s called the Originating Depository Financial Institution (ODFI). The institution on the other end is called the Receiving Depository Financial Institution (RDFI). Originating and receiving refer to the ACH transfer request, not where the money comes from or flows to. Whomever you ask to do the ACH is the ODFI.

The ODFI is responsible for making sure they have the authorization to credit or debit the other account. That’s why sometimes you are asked to fill out a form and send in a voided check. The RDFI is required to credit or debit the account on the date the ODFI specifies. Therefore if ACH takes longer at one place than another, the delay is almost always caused by the ODFI, not caused by “the system” or the receiving end.

If the ODFI cooperates, ACH should be a next-day process. You request the transfer today before a cutoff time. The ODFI sends the request to the ACH network in the evening. The RDFI shows it in your account the next morning. That’s how it works if you initiate an ACH transfer at Fidelity or WellsTrade. Everybody else should also be able to do it in one day if they really want to.

Why does it take two days, three days, or even longer at some places? It could be because they use a third party service provider. The third party does the debit first. It makes sure it gets paid the next day before it sends the credit. It takes at least two days in such scheme. Or it could be because the ODFI doesn’t send the request on the same day you request the transfer. They hold your request for extra days.

There are several reasons they hold your request. First, for risk management. If during that hold period you discover an unauthorized transfer request and you notify them, the money hasn’t really left yet. Second, for charging a premium on faster service. A bank may offer a slow ACH for free but charge extra for next-day ACH.

If you like faster transfers, use a more efficient bank or broker. Don’t let them get away with “2-4 days is the standard.” The standard ACH service is next-day.

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  1. KD says

    A Capital One guy was touting his company’s ingeniousness at a career fair by claiming that Capital One delays release of funds to the customer by 2 days to deny them interest. It is within their legally alloted time to complete the transaction. They also do the reverse, take the funds from the customer but not transmit it to the other party for next two days. The originator is very critical here. If you pay credit card from the credit card’s website, you can pay next business day. Try doing that using Capital One’s push/pull it takes much longer. Needless to say, I stopped using Capital One after that.

  2. Alex says

    Great article, and it confirms my suspicions on this stuff. I used to use Countrywide Bank as an online savings account before they were bought out by Bank of America (which added a whole host of fees to the account). They used to do next-day ACH transfers. After Countrywide went under, I opened an online savings account with Discover Bank. Their rates are good, but ACH transfers take 3-4 days. What’s amazing is that no matter whether I’m pushing or pulling money from Discover Bank, funds always leave the source account by the next morning. They just don’t show up in the destination account for a few days. I called their customer service number and asked who is earning interest on my money during the four days it’s in transit. His suggestion–use our $4 expedited next-day ACH transfer service.

  3. Jacques Boutet says

    I’ve noticed similar variances in the time to complete ACH transactions between Vanguard and Fidelity. Indeed, it gets even more excruciating with their respective 529 plans. My last ACH deposit to a Vanguard 529 account took 2 weeks to execute! I queried Vanguard’s Help Site and was told that because Vanguard is not a full financial services firm, it uses 3rd party banks for the ACH’s and thus can incur multiple settlement periods. No such issues with Fidelity! In fairness to Vanguard, my recurring ACH fund purchases are credited on the day they are are scheduled. I assume Vanguard “trusts” that I will have the funds available to cover recurring purchases, thus executes my monthly buys and waits for my money to catch up. Regardless, I’m drifting into the Fidelity camp, as the vagaries of a non-profit organization such as Vanguard begin to stand in contrast to a sharper, more nimble, profit-motivated Fidelity (who also manages to keep customer costs down!).

  4. CMF99 says

    One thing that isn’t mentioned in your post is the ACH prenote. A prenote is a zero-amount test transfer to ensure that the routing and account numbers are valid and the RDFI account is open and in good standing. These take a day. A prenote is usually done only during the initial ACH request setup, but some institutions do a prenote each time which would delay ACH completion by at least a day, since the 3 day window.

  5. Ken says

    Another issue with ACH transfers is that some banks limit the amount that can be transferred when initiated from their side. I’ve seen the limit as small as $2,000. It’s likely a risk management issue like the transfer delays.

  6. Random Poster says

    As others have noted, the float time really only benefits the banks.

    I’m particularly annoyed at how it takes Fidelity several days (2 or 3 days, is it?) to credit my account after the sale of a stock (i.e., make available cash for withdrawal), and then take an additional 2 or 3 days to actually deposit the cash into a designated checking account. Clearly, someone is making money from my money off of that 4 – 6 day float process, and it isn’t me.

    Likewise, I have no love for banks that feel the need to place a “hold” on deposits. In one instance, upon opening a new money market account and funding the same with a $92,500 check, the bank puts a hold on the funds for 10 days and then only credits me with interest on the same after such 10 day period has passed. I can partially understand not allowing me to withdraw the $92,500 for a period of time, but to deny me interest on the same? That I don’t understand.

    Too many people are, without my consent, making money off of my money. It has got to stop.

    • RandomPoster2 says

      You are mixing up the securities settlement period with the ACH transfer period. Every time you buy or sell a security there is a 3 day settlement period to deliver the funds or securities. Fidelity has 3 days to settle your trade then the ACH transfer could take 1-3 days.


  7. anie says

    Sorry to comment on an old post, but I’ve done my share of this push/pull as well and found that USAA will push and pull the fastest for me, hands down. I can also transfer funds to and from another bank/credit union to or from USAA and they get the money in or out the fastest, whichever benefits me the most. If I push/pulled from the credit union end, it can take 3 business days. Awful.
    On a different note, I have an “old” account at USAA and a “new” one (shared) and I do all this from the “old” one, which seems to not have any of these hold type restrictions. The new one does, however, put holds on most any deposit. Very easy to work around, no doubt, but also very strange. Still love them the best!

  8. MoneyCone says

    Excellent write up! Though I love ING, ING holds ACH funds for 5 days! Haven’t seen this long a wait at any other bank.

  9. Andy says

    Just opened checking and savings with USAA, transfered in $5k on Fri, hold time 3 days and won’t be available until next Thu. Will be closing accounts with them after that.

  10. MN says

    In the case of ACH ‘pulls’, the funds should be delayed until day 3 for risk management purposses.

    When a pull request is submitted on Monday, my bank makes the funds available on Wednesday. However, the RDFI has until THURSDAY to notify my bank that there are insufficient funds to complete the transaction.

    I work in risk management and this is a huge hole that the criminals drive through to steal large amounts of money.

  11. Grant says

    Part 2 of this whole subject. I transferred money via an ACH process. Money left UBS same day and ARRIVED in my People’s United Bank account same day, HOWEVER, People’s put the money on hold for 3 full BUSINESS days making is “available” to me on the morning of the 4th day. Why is this when both banks sent and received? Isn’t this almost like a “wire” at this point?

  12. Harry says

    See the comment right above yours. If you initiated the transfer at People’s United Bank, UBS can come back and reverse it. Therefore People’s United has to put the money on hold in case it gets a reversal.

  13. Fakhri says

    Can ACH make a transfer transaction from U.S.A to Indonesia,how long it can be reflected in Indonesia??when the transfering in US DOLLAR,can be it reflected in indonesia in RUPIAH immidiatly.

  14. Sanjay says

    Terrible to have no confirmed timelines for ACH transfers. As timelines vary by bank, Fed needs to take a note and speed up the process. He Obama ru listening…

    In Britain the the transfer upto 10,000 GBP or 16,000 USD (or more) can be transfered within seconds for free.
    In India it takes around 2 hours on a working day, to transfer funds. Again no charges.

    USA laws are framed heavily in favour of corporates.. my conclusion.

  15. DK says

    You are missing the legal context of ACH, which is the reason for delay. Business transactions both electronic and paper check, can be reversed automatically by the clearing house system within 3 days of the transfer. The time period is longer for consumer checks, 30 days. This is the security mechanism against bad checks since there is no cryptographic security for paper or electronic checks which makes them easy to forge. A wary business keeps track of all their bank activity so they can detect check fraud within the 3 day period and get their money back quickly. After three days its still theft, but then you have to use law enforcement and civil courts to get the funds back.

    What this allows is a very painful crime for an ODFI to deal with. A transfer can be originated by a payer from one account to a destination account. The payer can then cancel that transfer anytime in the next three days and get the money returned to the source account overnight. Now imagine that payer owns the destination account and they issue a transfer for 100K to a destination account they also owns. The transfer happens overnight. Money moves from the payer RDFI account into the ODFI account, and the same amount moves from the ODFI account to the payee RDFI account.

    The payer than withdraws the 100k from the destination account, and then issues a cancel on the second day. The ODFI HAS TO automatically return the canceled amount back to the source account and issue a cancel from the RDFI at the same time. At the time, the ODFI has no awareness that the 100K is missing from the destination account, so it operates on faith.

    On the third day, the thief withdraws the 100K from the source account that morning and is now in possession of 200K. That same morning, the ODFI gets a report from the RDFI that the cancel failed to retrieve the 100K from the destination account. The ODFI has to eat the 100K loss and hope they can use the criminal and civil process to recover it.

    The three day period is an escrow period for a fund transfer. It serves as a security mechanism implemented by the ODFI, presumably a 3rd party trusted by both parties. ODFIs can reduce the transfer time by incurring more risk. They often do so after engaging in credit checks at different levels of detail on the payer and the payee. They also use fraud detection software to reduce their risk. Ultimately they pay for an insurance policy that covers loses using the transaction fees for premiums.

    An example is Wells Fargo, they can do 1 day overnight transfers because:
    – $3 for the transfer (self-insurance is funded with this)
    – Only business accounts at Wells Fargo can do a 1 day transfer
    – They know the behavior of the source account, and can use that information to detect fraud.
    – They run credit checks on the owner of the source account.
    – The total amounts are limited.

    If you look at any 2 day or less money transfer solution you’ll find different combinations of policy that address the risk.

    • ReVeLaTeD says

      No offense, but you sound like Barnie Frank.

      ACH has one means test: Did the money get from A to B? That is a 24-hour process, no matter if you do a push or a pull.

      The problem is, every bank wants to be pushed to, so they don’t have to do any work.

      Take Fidelity Cash Management. If you want money in there, DO NOT tell them to pull it from the other account. Go to the other account and push it to Fidelity. If you have Fidelity do a pull, they’ll get the money in 24 hours, then proceed to put a 7-day hold on the funds for no reason. You can even verify with the source bank that they got confirmation Fidelity got the money.

      Citibank was the same way, credit union same way. Wells was the only exception, and no, I wasn’t run through the ringer as you propose. $3 fee, yes. That’s it.

  16. Anita says

    Wow. I never realized what ReVeLaTeD has reported. I always thought Fidelity was primo, my go-to place to do ACH pushes and pulls. But I guess I haven’t been looking closely enough at what is exactly happening. On Friday early morning I PULLed funds from Ally. Fidelity reported the funds being IN my account on Friday. But today, Tuesday, (2 business days later) it is still “pending”. I’m so disappointed in Fidelity. I didn’t realize that they have a policy to HOLD their pull’s for 7 days. I’m sorry I didn’t instead PUSH the money from Ally.

    I’ve also experienced this phenomenon Push vs Pull speed gap when opening a new checking account. I’m opening the new account and for the initial deposit, I’ll have my new bank PULL funds from Ally. Then maybe the next day, I go to Ally to PUSH more money, perhaps to satisfy a required direct deposit. More often than not, the pull of the initial deposit clears LATER than the push that in actuality occurred later.

    ReVeLaTeD’s statement explains what’s going on here.

    Live and learn. I guess. I’ll keep a watch on this current pull I’m in the middle of, and track how long it actually does take to receive the money.

  17. COBOL Dinosaur says

    Back in the late 70’s when I an ACH coordinator at a major bank in Dallas we had several companies that offered ACH deposit of paychecks. At the time it was new and cutting edge. By new and cutting edge I mean we had to shuttle magnetic tapes between the bank and Dallas Federal Reserve bank for ACH transactions. Now things are handled through data transmissions. At the time I wondered why more employers were still printing paychecks (or having ADP do it for them). I was told it was a major science tracking the average float a company could make on the payroll. Not every employee immediately deposits a check, and at the time check clearance could take many days, especially if an employer in Dallas used a bank in Timbucktoo for their payroll. So, many companies wouldn’t sign-up for ACH payroll deposit because they made more money on the payroll float than they saved not printing checks. I ended up here because I wondered why in this day and age it still takes 3 or more days in some cases. It’s still all about the money and who is making it. I’m not surprised.

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