What Are Same-Day Funds?
The term same-day funds refers to money that can be transferred or withdrawn the same day it is deposited into the recipient's bank account. Same-day funds are subject to the net settlement of accounts between the banks that present and remit the funds. Most customer deposits are not same-day funds and are usually not available for withdrawal until the next business day.
Understanding Same-Day Funds
Most banks make funds deposited by customers available within one to two business days. Business days are Monday to Friday, with the exception of federal holidays. This does not include Saturdays and Sundays, even if banks are open and accept deposits on these days.
Banks and other financial institutions that accept customer deposits must adhere to the Federal Reserve Board's (FRB's) Regulation CC. This rule enforces disclosures about hold policies and the availability of funds. Put simply, it states what deposits customers have access to as per the Expedited Funds Availability Act (EFAA) passed by Congress in 1987.
According to Regulation CC, banks are required to tell customers if deposits are held and when they will be made available for use either verbally or in print.
According to Regulation CC, the following deposits are usually available to consumers on the same day (or the following day in some cases):
- Cash deposits
- Direct deposits
- Wire transfers
- Transfers from other accounts at the same bank
- Deposits made through the Automated Clearing House (ACH)
- Checks from the U.S. Treasury
- Government checks
- Certified or cashier's checks
- Money orders purchased from the U.S. Postal Service
These deposits must be made in person at a bank or, in some cases, may be made at an automated teller machine (ATM) owned by the customer's bank, as long as the funds are posted to the account before the bank’s cut-off time for that day’s business operations. This is usually sometime in the mid-afternoon.
The majority of deposits aren't immediately available to consumers because they need time to clear. For instance, when a customer deposits a check into their bank account, the bank may put it on hold for a number of days. This allows the check to be verified and cleared so it doesn't bounce. Once the check is cleared, the hold is removed and the funds become available to the depositing customer.
Same-day funds refer to money that can be transferred or withdrawn the same day it is deposited into the recipient's bank account.
Banks must disclose the availability of funds and any holds that apply to deposits to their customers as per the Federal Reserve's Regulation CC.
Cash deposits, direct deposits, wire transfers, and certain checks must be made available for immediate use for customers.
Regulation CC also conditions when funds cannot be made available on the same day. This includes:
- Large cash deposits over $5,000. Banks must release the first $5,000 when a customer makes a large deposit and hold the remaining balance for a reasonable period of time. So if someone makes a $7,500 deposit in cash, the customer has access to $5,000 while the remaining amount is put on hold.
- Checks that are redeposited.
- Deposits made to accounts that are constantly overdrawn.
- When a check cannot be verified or may have a risk of bouncing.
- Deposits made during emergencies, such as a natural disaster.
- Deposits by new customers, as these account holders don't have an established deposit history.
Fedwire Funds Service
Same-day funds can also refer to federal funds that are sent via bank wire. This money would be sent between banks via the Fedwire Funds Service the same day. This service allows for immediate, irrevocable, and final real-time funds transfers. It’s available to financial institutions and depository institutions that have an account with the Federal Reserve Bank.
The Fedwire Funds Service is typically used to make large, time-sensitive payments. Funds are debited from an originator’s account and credited to the account of another participant in the Fedwire Funds Service. Funds can be initiated via telephone or online. According to the most recent data from the Fed, there were about 7,300 participants in the system.
Clearing House Interbank Payments System
Clearing House Interbank Payments System (CHIPS) transfers in New York are also known as same-day funds. CHIPS is a privately owned clearinghouse for handling large transactions. Transferring money via CHIPS costs less than transferring it via Fedwire, so banks typically prefer to use this service to transfer less time-sensitive payments.
While Fedwire is a real-time gross settlement system, payments made via CHIPS can be netted. This means that payments are not made in real-time. More than 50 banks participate in CHIPS, which settles $1.5 trillion in payments every day.