Initiated transfer from bank A to B. Stuck in limbo? How do ACH transfers work exactly?

Question

I scheduled a $250 dollar transfer from bank A to bank B. When I look at my transfer activities on bank A's website. I show that the transfer processed on June 4th. However, the amount was never deducted from the balance on the account at bank A. My account at bank B also does not reflect any incoming transfer amount for $250 dollars.

I called bank A and asked why the transfer says it was processed, but the account balance does not reflect it, nor does bank B show the transfer at all. The rep explained to me that they initiated the transfer, but that bank B never "reached in" to pull out the $250 dollars. This concept was new to me. I figured that when I schedule a transfer from A to B through A's website, A would "push" the money into the receiving account rather than granting permission to the receiving account to reach into account A to withdraw the authorized amount.

Is what the rep explained to me accurate? Is that how ACH transfers work? I asked him if he could just cancel the permission to bank B to withdraw the $250 as at this point I would not know whether they decide at some point in the future to "make use" of the permission and withdraw that money at some random date. The rep said no, that I would have to contact bank B and tell them to cancel the transfer. That makes absolutely no sense to me since I initiated the transfer through bank A, not bank B.

I feel like if I were to call bank B and ask them to cancel a transfer that I initiated at a different bank they are going to think I am a complete idiot.

Thanks in advance.

Answer 1

ACH - the Automated Clearinghouse - is essentially an electronic network that was originally designed to provide a fully digital alternative to the process of clearing paper checks. As such, the overall process flow is very similar to how checks are processed.

Essentially, the process relies on a network of clearinghouses that act as transmitters between financial institutions. Banks store transactions made by their customers and submit them to clearinghouses in batch files, usually several times a day. The clearinghouses sort them according to the destination bank and pass them on, recording the net debit and credit positions of each institution in the process. Banks use their own funds, in settlement accounts, to actually move money among themselves based on these net positions. So the banks basically give each other money via the clearinghouses, in bulk, based on the way the transactions are supposed to settle.

At this point, your bank is showing the transfer as "completed" even though no money has actually moved. They're doing this because the act of sending the transaction is completed (but not yet settled). Even though your account is showing the funds, there's likely a hold on them until the transaction settles, so your available balance may not currently match your actual balance.

It seems that this is the stage you're at now, and since your bank has already sent the transaction, there isn't a (convenient) way for them to stop it - so they're right, you really need to talk to the other institution. It is (sometimes) possible for a bank to issue a stop payment on an ACH transaction, similar to how they would on a check, although that usually comes with timing restrictions. ACH transactions are essentially considered "final" unless there's a legitimate dispute (i.e. fraud, incorrect amount, etc) - you can't really just change your mind once the transaction has been sent.

Once the receiving bank gets the file, they process it against their accounts. Assuming everything is legitimate, the receiving bank moves money between their customer's accounts and their settlement accounts as appropriate, and submits a response file back to the clearinghouse explaining what they did. This response makes its way back through the network to the originating bank, who settles on their end as appropriate between their clearing account and their customer's accounts. At this point the transaction is settled and "complete" in terms of there being no further actions taken.

Answer 2

An external ACH transfer between two linked accounts should be completed in 3 days or less, regardless of whether it is push or pull. Something has obviously gone wrong here. Did you do a verified linkage of these two accounts before you attempted this transfer?

Bank A has verified the outgoing transfer to bank B but B does not have the money. Contact bank B and explain that you have spoken to bank A and that they have indicated that you should contact bank B. Either they will resolve it or it becomes a game of "Monkey In The Middle". At some point, one of them is going to have to blink.