It’s Official: Same-Day ACH Gets a Third Settlement Window, Effective March 2021
We’ve already written about how ACH (automated clearing house) transactions are becoming a more popular payment method. But last month, the Federal Reserve increased the likelihood of widespread adoption when it announced in December 2019 it will support a third settlement window each day for same-day ACH transactions.
As it stands, there are currently two settlement windows for same day ACH transactions:
- A morning submission deadline at 10:30 AM ET, with a 1:00 PM settlement.
- An afternoon submission deadline at 2:45 PM ET, with a 5:00 PM settlement.
This third time will see the Fed keep its National Settlement service open until 6:30 PM Eastern time, and the Fedwire Funds Service will stay open until 7 PM; the late afternoon submission deadline at 4:45 PM Eastern time.
In other words, if a California bank can make a same-day ACH transaction by 1:45 PM Pacific time, it will be settled no later than 4:00 PM Pacific time.
This third window, which will take effect on March 19, 2021, will allow banks and financial institutions in the western half of the United States to make more same-day payments.
Additionally, the Fed is allowing a higher limit of same-day transactions, which is set to take place this month, increasing the per-transaction limit from $25,000 up to $100,000.
This will be especially helpful to freelancers, musicians, ride-share drivers, and other “gig economy” members who depend on the ACH. This can also help them avoid certain fees that other alternative payment platforms charge. Most banks typically don’t charge fees to send an ACH, although some may charge as much as $3 to receive one.
According to Nacha, the rule-making authority for ACH, this new third window can have some additional benefits to different companies and payments:
- Same-day payrolls, supporting business’ needs to pay hourly workers, and providing flexibility for late and emergency payrolls and missed deadlines; and enabling employees to have faster access to their pay in these cases;
- Business to-Business payments, enabling faster settlement of invoice payments between trading partners, and including remittance information with the payments;
- Expedited bill payments using both ACH credits and debits, enabling consumers to make on-time bill payments on due dates, and providing faster crediting for late payments; and,
- Account-to-account transfers, providing faster crediting for consumers who move money among various accounts they own.
Same-day ACH has been available since 2016, and Nacha estimates that they provided 250 million same-day payments in 2019, a 40% increase from 177.9 million in 2018. This new settlement window in 2021 will definitely increase the use of this type of payment, and can be a great boon to freelancers and other gig economy workers.
Photo credit: Steve Morgan (Wikimedia Commons, Creative Commons 3.0)
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