Understanding the Timeline for Processing Bank Transactions 

If you’ve ever been curious about when your bank processes your transactions, then you are not alone. Good thing we’ll delve into the banking world and discover the timeline for processing these transactions. 

Read on to understand how bank processes work and more!

When Do Banks Process Transactions?

Processing refers to the many steps in moving money into and out of a customer’s account. This often happens when a debit or credit card is used in a transaction.

Banks used to wait until nighttime to process payments. Nowadays, they do it many times daily to help customers get their money faster. 

Night Cycle

A process referred to as the “Night Cycle” is also employed nationwide to facilitate electronic money transfers. It facilitates Automated Clearing House (ACH) transfers and generally occurs between 10:00 PM to 1:30 AM EST. 

Large companies use night-cycle processing to move money into concentration accounts. Banks use these special accounts to combine and manage money from different sources.

The night cycle is different from the day cycle, which only allows the processing of ACH transfers between 8:00 a.m. and 1:00 p.m. EST.

Weekend and Holiday Transactions

Banks usually don’t process transactions on weekends or holidays. If you make a payment late in the day, it might not be processed until the next business day. 

Once you confirm payment, the bank will take the money from your account and wait to process it. This will make your account balance go down right away. 

If you don’t have enough money in your account when a payment is processed, the bank might try again later and charge you a fee. 

You typically continue to collect interest until the payment is finalized if your account earns it. The amount of interest you receive once it has been processed can change.

The Role of Automated Clearing Hous in Bank Transactions

The Automated Clearing House (ACH) is a digital network that enables electronic payments between banks. It is run and maintained by the National Automated Clearing House Association (NACHA), which is a non-profit 501(c)(6) organization. 

NACHA is also connected to around 11,000 financial institutions across the United States. In 2015, the ACH implemented two new settlement timeframes. Before that, transfers were only processed once a day at 8:30 AM EST. 

With the new time frames of 1:00 PM EST and 5:00 PM EST, banks nationwide can process transactions three times a day instead of just once. 

ACH Transfer Process

An ACH transfer goes through a step-by-step process that can take anywhere from an hour to two business days, depending on various factors. Here’s what happens:

1. You initiate a credit or debit transfer.

2. Your bank batches the transaction along with other ACH transfers and regularly sends them to the ACH network during the business day. This can happen within an hour or may be delayed until the next business day.

3. An ACH operator, like the Federal Reserve or Electronic Payments Network, receives the batched transactions, sorts them, and submits them to the receiving bank. This happens five times per business day.

4. The receiving bank processes the transaction and may hold the funds for a set amount to ensure the debited account has enough funds.
5. Finally, the funds are deposited into the receiving account, and the process is complete.

Defining Business Days

A business day is when a company is open and doing business as usual. In most Western countries, this means from Monday to Friday between 9 AM and 5 PM, not including weekends and public holidays. 

For the securities industry, a business day is when financial markets are open, and trades can happen.

Multinational entities engaging in international transactions often face additional settlement time due to varying workdays across different countries. 

Because of workday differences, bank transactions for multiple entities can take longer than routine domestic transactions.

Business days are also a way to say when something will happen, like when you get a package in the mail. For example, if you are exp expecting a package in four business days and a weekend is in the middle, you might not get it until seven days later. 

Entities Involved in Bank Transactions

The payment processing transaction involves multiple parties, including: 

Cardholder

The cardholder is the person or entity that possesses a credit card and receives an account from a card company or issuer.

Merchant

The merchant is a commercial entity or person authorized to accept cards and receive customer payments under an agreement with the card brands.

Merchant Banks

Under an agreement with the merchant, the merchant bank is the financial institution that accepts deposits generated by card transactions.

Credit Card Network

The credit card network is the entity that facilitates transactions between merchants and credit card issuers. The major credit card networks include

• Visa
• Mastercard
• Discover
• American Express

Credit Card Issuer

The credit card issuer is the financial institution, bank, credit union, or company that issues or assists in giving cards to cardholders. 

Payment Processor

The payment processor is the company appointed by the merchant to handle credit card transactions for their acquiring bank. These parties play crucial roles in the payment processing transaction.

These entities play a major role in banking transactions. The absence of one can disrupt the process, and a transaction would not be complete. 

Frequently Asked Questions

Do banks process transactions on weekends? 

Bank transactions are typically not processed on weekends or holidays. If you make a payment late in the day, it may not be processed until the following business day. 

What do “Business Days” mean? 

A business day is typical for a company when it is open and conducting regular operations. Typically, in most Western countries, this refers to the period from Monday to Friday, excluding weekends and public holidays, during the standard working hours of 9 AM to 5 PM.     

What time do ACH transactions get posted? 

The ACH network submits transactions at 6 AM, 12 PM, 4 PM, 5:30 PM, and 10 PM Eastern Time (ET). The timing of the receiving bank’s posting of transactions to the receiving account is determined by their policies and schedule.

Bottom Line

With technological advancements, banks can process payments multiple times daily, including through the Automated Clearing House (ACH) network.  However, it is also important to note that weekends and holidays can affect processing times, and the specific timing of payment can impact interest earned.