Why do direct debits take so long?

popsicle_2

In the age of 24 hour banking, why does it take so long for your money to go from your account to your beneficiary when using direct debit or paying bills via the inernet? If they can man phone lines 24 hours, why can't they do the actual banking business aswell? We recently tried to pay a credit card bill via internet banking, but may get charged a late payment fee as so far it has taken six days and has still not reached the account. Where does this money go, and how can't they get it there quicker? Is this just another money making swizz that the banks force you into, by not allowing you to draw enough money out to pay your bills, therefore encouraging you to do it by direct debit etc, so that they can steal the interest during the 'four working days' that they have it for??? Why is this not illegal... surely it's theft..?

MPH80

... it's getting fixed ... wait until November:

http://www.fastpayments.co.uk

Stephen_Leak

Its certainly taken long enough. Behind the high-tech' facade, the current system would not be unfamiliar to a patron of a 17th century coffee house!

However, once a payment is in the system, as computers work "24/7", they do get credited to accounts on a weekend. My last credit card payment arrived on a Saturday.

In fairness to the banks (What am I saying!) they don't earn any interest on transfers in the clearing system. All the transfers in and out cancel themselves out over a period of time.

YorkshireBoy

popsicle wrote: »

...therefore encouraging you to do it by direct debit etc, so that they can steal the interest during the 'four working days' that they have it for???

You misunderstand. Direct debit actually benefits you the customer because the money both leaves your source account and arrives in your destination account the same day. This means that, if you're smart and have a high interest current account, you actually maximise your interest earned in the source account.

BACS transfers are a different matter though, but these are supposed to be changing - see MPH80's link above.

YorkshireBoy

Stephen_Leak wrote: »

...they don't earn any interest on transfers in the clearing system. All the transfers in and out cancel themselves out over a period of time.

Since the banks themselves 'own' the clearing system, they do in fact collectively benefit from 'float interest' - at the expense of their customers (is my understanding ).

Homework

YorkshireBoy wrote: »

You misunderstand. Direct debit actually benefits you the customer because the money both leaves your source account and arrives in your destination account the same day. This means that, if you're smart and have a high interest current account, you actually maximise your interest earned in the source account.

BACS transfers are a different matter though, but these are supposed to be changing - see MPH80's link above.

Are the companies telling lies then because any direct debits I have show as arriving approx 1 week later? I don't have any that record getting the money they same day.

Do other people's direct debits get recorded as being received the same day?

Tori_Bellatrix

Homework wrote: »

Are the companies telling lies then because any direct debits I have show as arriving approx 1 week later? I don't have any that record getting the money they same day.

Do other people's direct debits get recorded as being received the same day?

Yes, mine do ... or at least the day they leave my bank account is the day shown as credited with the other account.

exel1966

As has been said before DD payments arrive on the same day it leaves an account. Whether a company records it as such is a different matter, but the fact remains it will be there.
Other payments : BACS/Transfers/SO's will take anything between 3-5 working days depending on the bank/bs concerned.

In the case of your C/card bill that would have been via a transfer by the sounds of it so yes it will take a few days til the system changes. Having said that sometimes it takes c/card companies a couple of days to update online accounts so even though the payment as gone through it may not immediately show online. My mint and AMEX accounts take 2 days for the payment to show up, though it is credited the day the payment is made.
One way to speed up the payment process is to pay your c/card via phone with a debit card, but it will depend on the companies you use.
If you set up a DD with your card company it will leave your account on the due date and you'll NEVER get a late payment charge.

Homework

Tori_Bellatrix wrote: »

Yes, mine do ... or at least the day they leave my bank account is the day shown as credited with the other account.

Thanks for that - I've got some calls to make on the basis of that information. We have had a few enquiries recently about why payments were not recorded on bills and we had overdue balances that had been paid by direct debit on the due date. We were told that HBOS must have been slow to send them through when the request was made even though it left our account on the correct day.

cifpower

YorkshireBoy wrote: »

Since the banks themselves 'own' the clearing system, they do in fact collectively benefit from 'float interest' - at the expense of their customers (is my understanding ).

As it says on the website:

Float is where paying customers are debited on day 1 but the beneficiary is not credited with the payment until day 3; the banks thereby earn two days interest on the payment

YorkshireBoy

cifpower wrote: »

As it says on the website:

Float is where paying customers are debited on day 1 but the beneficiary is not credited with the payment until day 3; the banks thereby earn two days interest on the payment

And with a lot of the smaller independent (ie non-clearing bank) credit card providers, and some savings accounts*, using 'collection' accounts, the banks benefit to the tune of (up to) 4 days interest with each BACS transfer initiated.


* eg, YBS use NatWest for transfers out.