ACH transfers (or better know as electronic funds transfer) is supposed to be the new method of money transfer in the 21-st century. But strangely enough, I find that I am reverting back to using checks for some of my transactions instead of using ACH. The following are some examples.
Depositing money at brokerages
TD Ameritrade offers a very fast ACH system for funds transfers. Recently, after setting up two new links to my bank accounts, I used the system to move some money from one account to another. That however seemed to trip them up and their compliance department sent me a secure message telling me not to use their ACH system to transfer money. In addition, they pointed out that, at their discretion, money pulled in using their ACH system can be held for up to 60 days before I can withdraw it.
Funds deposited electronically may be withdrawn three (3) business days after settlement date. However, all electronic deposits are subject to review and may be restricted for 60 days.
If I sent them a check, the funds can be withdrawn in six business days; there are no further restrictions after six business days. If I use ACH, there could be restrictions for up to 60 days.
My current paycheck goes into the Fidelity mySmartCash account. I had setup the mySmartCash account a few years ago for its very good BillPay system and availability of market rate money market funds. But now that the market rate for money market funds is very low compared to online savings accounts, I have been pulling out any excess money and moving them to the savings account (I am using Alliant Credit Union’s savings account) whenever my paycheck is credited. (I know I know, I should update my direct deposit instructions…).
To transfer the money, I do not use Fidelity’s ACH system. Instead, I write a check against the mySmartCash account and deposit into one of Alliant CU’s network of ATMs. The result: I start earning interest on the day of deposit (say Thursday). The mySmartCash account is debited only on the following Monday.
Similarly, when I have money to transfer out from TD Ameritrade, I write a check against that account and deposit it into the Alliant’s network of ATMs. I no longer use TD Ameritrade’s ACH system.
Paying for taxes
To pay for state and federal taxes, I used checks instead of ACH. This gives me additional float of the funds before the debit.
On surface the ACH system is a very efficient means of money transfer, however because of its relatively lack of security for the bank “pulling” the money, many financial institutions have chosen to impose limits on these transactions. Some of the liability issues are discussed in the following post on BankDeals:
If a bank initiates an ACH credit to another bank, that ACH credit cannot be recalled. So if a bad guy somehow got into a Provident account and transferred all the money out, Provident would be liable to the account holder (assuming it was a consumer — not a business — account) and it would have no easy way to get the money back from the bank to which it was sent.
On the other hand, if another bank initiates an ACH debit from a Provident account, then NACHA rules allow Provident to reverse the transaction — no questions asked — for 60 days if they can produce a Written Statement Under Penalty of Perjury (WSUPP) from the account holder. They are under no obligation to investigate the legitimacy of the WSUPP.