How Bank Deposits Are Posted

March 06, 2011 | Kate Horrell

I’ve gotten a ton of questions regarding how bank deposits get processed.  I’m no banking expert, but I know a bit about it.   I will tell you everything I know, and if readers have more info, they can add it in the comments.  Hopefully, we’ll all learn something.

First, banks do not process each individual transaction (deposit or withdrawal) as it happens.  As transactions come to the bank during the day, they are collected and held until the evening.  At some time during the night, usually over the course of several hours, all the transactions are processed in batches.  Batches are groups of transactions that are big enough to be efficient, but small enough not to overwhelm the computer system.  I will use my cookie making example again:  If you need 500 cookies, you wouldn’t try to make enough dough for 500 cookies in an enormous bowl and then put all 500 cookies in the oven at the same time.  You probably also wouldn’t make enough dough for just one cookie, and cook one cookie at a time.  Instead, you would do the cookies in batches, maybe 50 cookies at a time, over the course of a day.  This is the same concept as banks processing transactions.

Banks do their processing overnight because it is when their computer resources are not being actively used by their employees. The hours that each bank processes are a little different, but basically it is in the middle of the night. This is why you might find that your transactions process at midnight one time, then not to 6 am on a different day.

Then we come to the issue of ordering the transactions. I have read a number of well-documented articles that claim that many banks will process your transactions in a particular order, particularly if you are going to overdraft your account and incur overdraft fees. I’ve never had this experience, but it has been years since we messed up our account, and we also have overdraft protection. It seems entirely likely to me as banks are in the business of making money. In my experience, however, Navy Federal Credit Union does process payments before it processes withdrawals. Apparently, that is unusual and it is yet another reason why I like Navy Federal.

Every payday, I read lots of comments from people comparing notes, wondering why their deposit was posted at a different time than their friend’s deposit. I hope this helps you to understand how this could happen.

Please, my banking readers, share your information.

Comments

  1. Eric says:

    Kate,
    One question. So if my pay date on my mid month LES if you will says 11 march 11. Why doesn't the bank post it and be availible on 11 march? It shows a pending deposit through my bank, but says wont post till the day after.. Not really understanding that part. But i just opened a new account at Navy Federal ,so i am not real sure on how they work there deposits.

    • KateKashman says:

      The banks are "supposed" to release funds on payday. The reason that DFAS releases the funds to the banks earlier is so that DFAS can upload all its records to all the hundreds of banks, and the banks have time to get it all processed through their system before payday.

      That said, many banks do post the deposits before the actual payday. USAA has a policy of posting the deposits one business day early (based upon receiving the information from DFAS.) Navy Federal has been promoting early deposit for customers who have an Active Duty checking account, at it has now come 2-3 days early for the last few pay periods.

      Now, if you are talking about Navy Federal and how they phrase their posting: If your pay posts tomorrow, it will not be available until Saturday because they use the overnight hours to process all those transactions. Each individual transaction, like a pay deposit, is actually several transactions. The pay has to be credited to a holding account, then it needs to be debited from that holding account, then it needs to be credited to the individual account holder's account. Given the volume of military pay that Navy Federal is depositing, they do all their processing overnight.

      I hope that answers your question.

      • Noel C Robertson says:

        How can a federal benefits be overdraft when it direct deposited each month and no checks are written for the money. I all way use the debit credit card for transaction or come into the banks for withdraws and now I am overdraft for large sums of money. Each month a large sums of money is deposited into my account?

        Every time I withdraw to pay bills or buy food I am hit with overdraft fees and the money has been posted to my bank account. They said, I owe $535,00 that they automally take from a VA benefit check,my IRS taxes check and now they say I am overdraft again. I recent apply for a Overdraft Plan on my account. I wanted to know how this happen when a large sum of money is direct deposit into my account?

        • Kate says:

          Mr. Robertson, it sounds like something is going awfully wrong. Depending on how you use your debit card, the debit may not occur for several days after the purchase. It is possible that you are spending more than you realize, and more than the balance of your account. You really need to go in and sit down with your banker and figure out what is happening. If you can't do that, ask a financially savvy friend or relative to go over your account statement with you. This could get super-expensive very fast. Don't delay in getting this straightened out.

  2. Kyle says:

    but well dfas release the funds to the bank on a weekend also

  3. KKk says:

    What happeened if you get your salary double but you don't know why

  4. bill says:

    over night on week days banks do work but wonder if there are any banks that do still do overnight work on weekends so transactions can be accurate and up to date during the weekends rather for them to wait to post everything on the following monday.

  5. amber says:

    Does Navy Fed post deposit on a friday night? because it was posted but the funds arent going to be available till tomorrow. In the two years I have had Navy Fed I have never seen them deposited on a friday night.

  6. unnamedlord says:

    This is a pretty stupid reason. Most of the big banks are multinational and keep high computer usage throughout all of the day (When america goes to sleep, europe awakens). The servers do not have to be local and check processing is actually not that computationally expensive. Also, if this were actually true then why aren't checks processed on the weekend? Isn't that when the computer usage should be the lowest?

  7. I hate Banks says:

    this is all BS! Banks hold money to buy foreign currency at night in USA and they make a killing doing so. Each bank has branches oversees and they use the money they hold to trade on foreign markets.

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