If you have a checking account open, and you draw on the account to pay your bills and purchases, it's a good idea to learn how your bank's transaction posting works. With the advent of debit cards and automatic withdrawals, the ordering of account transactions gets more complex and the potential for problems rises. The basic rule of thumb for account holders is to ensure that you have sufficient funds to cover all transactions as soon as you make them.
No More Floating
Once upon a time, it was possible -- if not ethical -- to write a check and cover it later with a deposit. "Floating" a check worked because transaction processing between the check writer's bank and the payee's took several business days. That is no longer the case -- a check now can "post" to your account as soon as the payee has it in hand, and the same is true for debit-card transactions, online purchases, "check by phone" debits, and automatic withdrawals that you authorize.
Posting means that the debit -- or credit -- is applied to your account balance and the transaction is completed. After a check or other debit arrives at your bank, it posts in the evening along with credits and any other transactions that occurred since the last posting. Your bank processes all of these items together in a batch, and in a specific order. Each bank sets its own rules for how it's done; deposits may be processed before debit-card charges, for example, or vice versa. After the posting is complete, your account carries a new "current" balance, which some banks call a "ledger" balance. The current balance is the amount of money in your account after the bank has processed the day's credits and debits.
Deposits and Withdrawals Through the ATM
If you withdraw money from an ATM, the debit goes straight to the "available" balance as well as the current balance. The available balance is the money that you or the bank can use immediately for transactions. It changes frequently as you use your debit card at a store or ATM, but the current balance changes just once a day after the evening's posting. Some ATMs now accept deposits by check and cash, and may make the funds available immediately, depending on the bank's policies. You can also update the available balance immediately with online banking, which allows instant transfers from one account to the other.
Automated Clearing House Transactions
Paying a bill through an automatic withdrawal from your account can be a rather mysterious process. The transactions are conducted through the Automated Clearing House network, called ACH. Although they are more convenient than writing and mailing paper checks, these automated debits can post immediately, soon, or in a few days. Each bank, utility company, credit card issuer, and financial services firm has its own procedure for posting the transactions. After the transaction officially takes place, your bank may post the debit while the payee is holding the funds, and taking its sweet time about crediting your payment. Keep sufficient funds in the account at all times if you authorize ACH withdrawals.
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