Maybe it’s called a bank draft, I don’t know. Lets say I want to move $100K from an account paying 4.40% interest or $12.05 a day, to one paying 5.00% or $13.70 a day.
A wire transfer that happens the same day would cost $30 to $40 or 18-24 days to break even at the better interest rate.
ACH is free but could lose 2-3 days interest during the transfer or $24-$36, so about the same days to break even.
If I could mail them a check, and they would let me know when they got it and when it will be deposited, I could transfer the funds into the checking account to cover the check and not lose any interest. Does that make sense? Is there such a thing?
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I know you have innocent intentions, but writing a check on an account that doesnt have the necessary funds is check kiting.
The closest to it being “a thing” is to mail a check and guess when it’s going to be received. Odds are it’s going to miss by a day or two anyways, and you can only hope it doesnt show up earlier.
The bottom line is, you simply need to decide if chasing a .6% higher rate is worth the costs, or if it isnt. If that 2 week breakeven time is going to be a problem, it’s probably not worth chasing the rate increase to begin with.
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Maybe I’m not using the correct terminology here. As an example, I’ve sold cars at auctions and if I don’t have the title at the time of sale, the auction gives me a draft for the sale price, less their fees. That draft would bounce if I tried to deposit it. Once I turn in the title, the auction authorizes the draft to be valid, and now I can deposit it like any check. I guess this would be too complicated for a transaction from an individual.
When I ACH pull money from my bank to Fidelity, Fidelity credits my account and I can invest the funds the same day. It takes a few days before I can withdraw the money from Fido.
Many banks aren’t that quick. If you make a transfer on a Monday, funds may be withdrawn from your account on Monday but may not get credited to your other bank until Wednesday or even Thursday. Not a big deal of one person except for the lost interest, but a bank doing this a thousand times a day is making a lot of money of the float.
That is called positive pay, where the bank will only pay checks that they have been informed are valid. It prevents someone from printing up checks with the auction’s bank info and writing some to themselves, because the volume of checks being perpetually written would mean such fraud might not be discovered for a long time. It’s a feature mostly available on business accounts.
Still, at best it’s a gray area for them to be writing and handing out checks they know will be returned if cashed. The positive pay feature is to prevent unauthorized checks, it is not to allow the writer to control when the recipient can cash their check.
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I think you missed the main point in that example. Your example is an ACH push, but his is an ACH pull. In my experience with pulls, the money shows up at the destination account on or before the day it’s removed from the source account. I don’t use pulls because usually the transaction limits are lower, and the funds are not available for withdrawal for a few days, but that money still earns interest.
The bank I’m trying to transfer to has a $500 a day pull limit so that won’t work.
That’s a big hit or miss. I’d estimate that a majority of banks will post the deposit the day after it’s withdrawn from the source account. Many of the rest will use 3-day transfers and not post the deposit until the money is actually received three days later. It’s getting rarer and rarer* to find banks that post deposits when requested, while the money is still in transit.
*Brokerage acccounts are different; it’s still common for them to credit deposits immediately so you can purchase stocks/investments right away. They just wont allow withdrawals until the funds settle.
For a six-figure transfer, I think he needs to just accept that he’s going to lose some interest one way or another. He may still be able to find a way to pull it off, but the effort required isnt going to be worth the $30 savings. More importantly, each day he waits just adds a day to when he’ll be past the break-even point.
Or find a place with cheaper wires.
I didn’t know you can shop around for a wire service other than what the bank you are transfering money from uses. IF so, suggestions?
He’s rate chasing. He’s stuck with the bank that is offering the rate.
You cant. It’s all the same service, and banks chose what to charge, if anything, for providing the service. You cant shop for a new bank with cheaper wires, because you’ve already shopped for banks based on interest rates so you’re stuck with whatever wire fees they charge.
Got it. There’s no real way to get around this. It’s essentially a reduction in the implied interest rate.