When you conduct a transaction at your bank, the teller “posts” the transaction to your account so that your current balance reflects the deposit or withdrawal. At my bank, this transaction is called a memo-post because it is pending approval. At the end of the business day, the paperwork for each transaction is put through processing. This is where a team of people and technology review the transactions for accuracy. If no corrections are needed, the transaction is then hard-posted to the account and is no longer considered a pending transaction.
The process of hard-posting begins at the end of the business day. Business days are determined as Monday through Friday, with the exception of federal banking holidays (i.e. Memorial Day and Christmas). The end of the business day is determined by a financial institution’s cut-off time.
Cut-off times designate when that day’s processing begins, and mark the “rollover” to the next business day. Cut-off times vary depending on your bank and city. Banks will often remain open past its cut-off time, which is why it is important to be aware of the change in business day, especially if trying to avoid an overdraft fee or negative account penalty.
At my bank, a fee is charged when a purchase is made using overdraft or bounce protection, but some banks will apply a fee for every day an account is negative. Because of the possibility for these fees, make sure you understand how cut-off times affect your deposits. If you make a deposit before your bank’s cut-off time, your transaction will be processed that same business day. However, if you make a deposit after the cut-off time or during the weekend, it will not be processed until the next business day, meaning you may be subject to a fee since you are ending the business day with a negative balance.
To help you understand, here is a basic scenario. At Bank XYZ, the weekday cut-off time is 5:00 p.m., but it remains open past the 5 o’clock cut-off. The breakdown:
- If you visit Bank XYZ before 5:00 p.m. Monday through Friday, your transaction will go through that same day’s processing (which begins at 5:00 p.m.).
- If you visit Bank XYZ after 5:00 p.m. Monday through Friday, your transaction will go through processing on the next business day.
- If you visit Bank XYZ after 5:00 p.m. Friday or anytime Saturday or Sunday, your transaction will go through Monday night’s processing (as Monday is the next business day).
The same timeline applies to card transactions. When you make a card purchase, the transaction will memo-post to your account and will be reflected in your current balance. When the merchant closes its business day, the transactions will hard-post. Traditionally, the card purchase will hard-post in alignment with the bank’s end-of-the-day processing, but this can vary depending on the merchant’s timing as well as the bank’s.
The moral of the story: be knowledgeable of your bank’s timeline. Business days are classified as Monday through Friday with a few federal holidays throughout the year. When a holiday occurs, it is treated the same as a weekend day where all items are memo-posted to the account throughout the day, but nothing will hard-post until the following business day. As far as cut-off times, they will rarely affect you unless trying to deal with a negative balance. However, it is wise to be aware of the cut-off time, and your bank should make this easy by having signs posted at the teller line.