What Is a Night Cycle?

A night cycle, created in 1979, is used to process Automated Clearing House (ACH) transfers (debits and credits) at night—generally between 10:00 p.m. and 1:30 a.m. Eastern Standard Time (EST). The ACH is a nationwide system for transferring money electronically that is sometimes referred to as the "nighttime window."

Key Takeaways

  • The night cycle processes ACH transfers, which are electronic money transfers, at night.
  • While the day cycle for processing ACH transfers is 8:00 a.m. to 1:00 p.m. EST, the night cycle usually runs from 10:00 p.m. to 1:30 a.m.
  • The network is set up to process a large number of payments, from payroll and vendor payments to utility bills.

The Basics of Night Cycles

Corporations use night-cycle processing to move funds into concentration accounts, which are centralized deposit accounts used by institutions to aggregate funds and process and settle internal bank transactions. It stands in contrast to the day cycle, which allows processing of ACH transfers between 8:00 a.m. and 1:00 p.m. EST.

Compared to a wire transfer, ACH payments take longer but are less expensive and more secure.

The Automated Clearing House specializes in processing high-volume, low-value payments. The relatively low fees charged encourage businesses to use the service. Its infrastructure was created to facilitate large payment batches so that large numbers of payments may be made simultaneously.

$100,000

This will be the new same-day ACH per-transaction dollar limit starting in 2020. The current limit is $25,000.

Examples of Night Cycles

The credit transfers that the ACH facilitates vary widely in nature and may include payroll, direct deposit, vendor payments, and retail payments. It also accommodates direct debit collections, which include consumer payments such as insurance premiums, utility bills, and mortgage loans. Because ACHs are net settlement systems, any given settlement may experience a delay of up to several days, which can trigger a degree of settlement risk.