Editor’s Note: This post was originally posted on August 14, 2014, and has been updated for accuracy and to include updated information.
Have you ever wondered why you never receive your pay on the weekend, even if it is a direct deposit? Or, it’s the middle of the week, and you know that your local financial institution is open, but your Social Security deposit isn’t in your account like it should be. When you asked your credit union or bank, they just told you that it’s because it’s Columbus Day. You probably don’t care what day it is, you just want your money! Are we speaking to your soul?
So… Why don’t I get my direct deposit over the weekends or on holidays?
Well, the reason behind both of these situations (and many more similar to these) are that most electronic transactions, such as direct deposits go through the Federal Reserve Bank. The Federal Reserve is only open Monday through Friday. If the Federal Reserve is closed, then nothing is able to be processed. The Federal Reserve is also closed for 10 holidays throughout the calendar year (see chart). For those times when the Federal Reserve is closed on a normal business day, it is up to the company depositing money (or withdrawing) as to whether the transaction is done a business day before the normal date or the next business day after the holiday.
It is important to note that a banking regulation set forth by the Federal Reserve Bank, Regulation CC, executes the Expedited Funds Availability Act of 1987, ensuring that:
- Your deposited funds are available as soon as possible
- There are minimum time limits that your deposit can be held
In most cases, funds from preauthorized credits such as social security benefits and payroll payments will be given same day availability. Find out your financial institution’s policies to verify the exact details.
Other Considerations and Common Queries About Direct Deposit
Benefits of using direct deposit
There are several benefits associated with using direct deposit. The first is safety. When you have a physical check, you run the risk of losing it or having it stolen. With direct deposit, you don’t have to worry about handling a physical check. It is essentially a hands-off transaction.
Convenience is another benefit. Utilizing direct deposit allows you to save a trip to the bank and significantly cuts down on the amount of bank visits made.
Finally, with direct deposit, promptness is appreciated as you don’t have to wait for a check to arrive or for it to clear with the credit union or bank. Direct deposits are instantaneous.
What is the average hold period for deposits and why?
Generally, funds availability begins by the second business day at the latest, and could be available the same business day, depending on when the deposit went through.
Financial institutions tend to hold funds longer than before due to the prevalence of check fraud and counterfeit checks. They want to take extra precautions, ensuring there won’t be any issues with the deposit before making it available to you.
It is important to note that a portion of the funds from a deposit could be available to you before the check officially clears. In the event the check turns out to be fraudulent, and you’ve already spent the funds, you could be held liable for those funds in addition to other fees.
What kind of payments can be made by direct deposit?
Any continuous, regularly scheduled or preauthorized payments can be made using direct deposit. This includes (but is not limited to) payroll payments from your employer, payments from the Federal Government (i.e. social security payments, veterans payments, and supplementary security payments), payments from state governments (i.e. retirement and unemployment payments).
How can I get started with direct deposit?
In order to start having your payments received via direct deposit, simply ask the company in charge of your payments if they offer direct deposit. If so, they will provide you with paperwork to fill out that authorizes them to deposit money into your account. Generally, you will need to provide a voided check from the financial institution in which you would like to have the money deposited to.