Banks have given consumers plenty of reasons for cynicism in the 21st century.
From the Great Recession (2007-09) to billion-dollar fines for illegal activity to the recent collapse of some large banks, it’s no wonder why some people harbor distrust for these key pieces of our financial system.
It can raise questions. For instance, does that wire transfer or ACH deposit really take that long to post? Or is my bank finding yet another way to line its pockets at my expense?
That’s what a listener of the Clark Howard Podcast recently asked.
Does My Bank Delay Processing Deposits and Transfers To Make Money?
I think my bank delays posting my ACH transfers in order to make extra profit. Is that possible?
That’s what a Clark listener asked on the June 12 podcast episode.
Asked Michael in Ohio: “I have several high-yield savings accounts. When I do ACH transfers among them I’ve noticed that one bank takes at least three business days to complete the transfer whereas the other banks complete the transfer on the next business day.
“Is the first bank getting my money on the next business day but not posting it to my account until later, thereby giving itself a float with my money?”
It’s not the first time someone has asked Clark about this issue. He’s mentioned his past TV work where they experimented by mailing money to various banks with package tracking enabled.
That way they knew exactly when the banks received their money. And then they documented how many business days it took for those banks to post the funds as available in their accounts.
So is something like Michael suspects still possible?
“It’s very possible that they’re playing games through ACH and they’re getting a day or two of float on your money,” Clark says.
“That would become an issue if you needed your money quicker. And I don’t have a sense from you if it’s every single time it takes them three days where it takes the others one day. But there’s really no excuse for that.”
Bank Delay: Expect Helpful Changes Soon, Clark Says
Banks have long existed to make profits. That’s opposed to credit unions, which are member-owned and exist to serve their members.
The for-profit nature of banks is true from the United States to Switzerland to Australia and everywhere in between. However, the U.S. financial system is unique, and not in a good way, in allowing its banks to play profit-taking games when it comes to moving money.
“And the good news coming forward is once the Federal Reserve goes to the world standard for moving money, we won’t have all these shenanigans anymore with the banks,” Clark says. “Money will move for free and it will move instantaneously in a transfer from one financial institution to another. And it will be a much better system.
“As best I can tell, we are the only developed country including many developing countries – we’re the only holdout that has not gone to the world standard for quick movement of money through the central bank.
“So this problem hopefully will be soon in the rearview mirror. It’s only been held up by lobbying by the banks that have not wanted the world standard system for moving money.”
Be Cautious Chasing Yield in the Top High-Interest Savings Accounts
If you’ve ever read our article on the best high-yield savings accounts in the United States, you’ll notice that I don’t simply slap all the banks paying the most interest into the post and call it good.
I get consistent questions about why we do or do not include a particular bank that’s paying 0.20% more than one of the institutions on our list.
This is a recent phenomenon. Because even the most competitive banks were paying peanuts for interest as recently as March 2022. Back then, the Federal Funds Rate set by the Federal Reserve sat at 0% to 0.25%.
Some — but not enough — consumers are waking up and shopping their savings accounts. The big banks are still paying peanuts, counting on passive customers to leave their money in accounts, effectively bankrolling their profits.
However, some people go the opposite route, intent on capturing every hundredth of a point they can find in APY.
Why Selecting a High-Yield Savings Account Is Getting Tricky
A large percentage of banks that are currently paying 4.5% and above — extremely competitive rates — are cutting corners in some way to squeeze out those last tenths of yield in order to brand themselves as offering the best rates.
Usually that involves some combination of being extremely cheap about customer service, user experience on the app and website (or worse, the bank software itself) or delaying your access to your money in some way.
The latter is especially ugly. Some banks are much more upfront about those practices, putting the processing delay times front and center at the beginning of their disclosures. Others are more underhanded, surprising customers with account freezes and aggressively labeling customers as potential fraudsters.
The end result is that these banks seemingly cover the cost of spitting out that extra yield by floating themselves a free loan for days or even weeks. They earn interest on your money during that time.
Final Thoughts
If there’s a silver lining to the current brand of, as Clark calls them, “shenanigans” by some banks, it’s a renewed focus on shopping your business.
Just because you’ve been with the same mega bank with physical branches seemingly in every town in America for decades doesn’t mean you’re stuck with them.
There’s nothing wrong with wanting competitive interest rates. In fact, you should be making sure you’re earning a competitive rate on your idle cash. But make sure your bank choice is intentional and that you’re being proactive with that choice.
