Why isn't Electronic Banking Istantaneous? (1 Viewer)

[Jeff_HR]

I have a credit card company that when I make an online electronic payment does not "post" the payment until Midnight of the next day if I make the "electronic payment" after 3PM EST, and they don't make the funds available until the day after that. To my own logical way of thinking, this is absurd! It seems to me that an electronic transaction should move the funds instantaneously from one account to another with no PHONEY delays.

Someone with banking knowledge please explain this system to me. Thank you.

 

[Mike Slade]

I believe in bank card processing there isn't much realtime processing for posting and most, if not all, is a batch process once a day.

 

[SteveA]

I'm not a banking expert, but I believe there are two different types of transfers: ACH transfers and wire transfers. ACH transfers are what most electronic bill payments and direct deposits use. They take at least one business day, I think. Wire transfers are pretty much instantaneous.

 

[Chris Bardon]

I think it's just a matter of communication between different banking networks being batched for efficiency. Rather than keep live links open all the time, these transactions are done in an overnight batch process. Keep in mind that in my experience, the banks are probably working with 10 or 15 year old technology on their back end, so "live" updates might not be that plausable.

It's still not a bad system though-at least you CAN do everything electronically. I haven't carried any cash regularly for at least five years.

 

[mark alan]

Funny how they don't post transfers in immediately, but they sure do on withdrawals and electronic transfers out.

I have also noticed that they run transactions, they always do all the withdrawals and check payments, before they do the credits. A couple of weeks ago, my bank paid a bunch of checks I wrote, bounced 4 of them, charged me $140 in fees, then credited the $3,000 check I had deposited. Suffice to say, I was a tad annoyed and let them know it. When I threatened to file a complaint with the state, they credited the charges back.

 

[ZacharyTait]

Damn! I wish I could deposit a check that big into my checking account.

 

[Shawn C]

A lot of people don't realize that most credit card charges and withdrawls are really TWO transactions in the background.

Step 1: You make a withdrawal or a credit card purchase.

Step 2: Authorization. The bank or credit card company checks to see if you actually have the funds available and thew bank marks that money as withdrawn.

Step 3: The institution where you made the charge performs a "settlemnt" transaction to finalize the actual charge, usually at the end of the day or several times a day.

Step 4: The bank then officially marks the money as being gone.

This is why a lot of people thing that a gas station CHARGES you $50.00 every time you get gas. It's just the the gas station is trying to make SURE that you are able to pay for the gas you bought. They bang your card for $50.00 to make sure you don't go out and spend every last dime in you account before they get their money. They don't get their money until after the settlement process.

The problem is that if you look at your account before the settlement process, you will see a charge for $50.00 instead of the actual amount of your purchase. When the institution sends the settlement, with the actual amount, you account is 'corrected'.

This also helps merchants / retailers deal with fraud. With the right software, they can weed out the fraudulent charges BEFORE the settlement step.

I think that some places are starting to get away from this and are just performing the authorization and the settlement at the same time. Gas stations can't do this since you the final amount of the sale isn't known until after.

 

[Chris Bardon]

Are you sure about that? What you're thinking of is what's known as pre-suthorization and completion. A pre-auth is just a "hold" on money that will automatically fall of the account after a few days, and is never shown to a customer. This is the same sort of thing that happens if you rent somehing that takes a credit card deposit. An authorization is obtained for the money, but the transaction is never completed. Most retail transactions will do both instantaneously, or possibly do the authorization once, and then complete all the day's transactions in a batch overnight.

For gas stations (pay at pump), it actually does a $75 pre-auth, and then a completion for the actual amount. The completed transaction might not show up until a day or two after, but the pre-auth is still there until that point. This way, if you have $100 left on the card, and buy $30 in gas followed by $30 elsewhere, the second purchase will come up declined (but would be approved the next day when the completion has gone through).

I worked for mastercard for a couple years, and never actually saw a pre-authorization printed as a transaction (unless a merchant was doing something strange).

 

[Todd Henry]

Chris,

I think Shawn is saying that you can see the pre-authorization on credit card activity online not on the statement.

I can see that on my Debit Card right now. I filled up my car this morning and there are 2 pending transactions. One is for $20 and the other is for $23.72 (the actual cost).

If I look Monday morning, the $20 charge will be completely gone.

Todd

 

[Thomas Newton]

One thing that I do not like is how my credit card and long distance vendors have taken it upon themselves to shred my paper checks! The checks show up as EFT-like transactions (no cancelled checks, no scanner images).

 

[Jeff_HR]

So I guess for the honored privilege of using this great & wonderful financial system, we all have to bend over & spread them! :frowning:

Perhaps going back to the barter system is an idea.