Float Time
Not too long ago we received one of those innocuous little notifications from our bank in the mail. You know the ones. They come in the same non-descript envelopes as do your monthly statements (and incidentally the spam offers they call “important information”). Usually, they’re regarding something like the changes in their privacy policy and are written in microfiche-sized print on paper that could double as toilet tissue it’s so thin. Most people probably don’t even read the things before filing them into the trash. We usually give them a quick once-over in case it says somewhere in the fine print that by not immediately closing our savings account we agree to let the bank install cameras in our home and indenture our children into slavery.
Well, the latest one we received informed us of a change that would take effect in the near future regarding deposits. In a nutshell, the bank was telling us that the funds from ANY check we deposited would not be available for two business days. You could have partial funds after 24 hours. This seemed reasonable to me until I thought about it in relation to how we lived.
We don’t make a lot. Our monthly income is enough, but not by much, and the first of the month, when rent is due, is always pretty tight. And like many people, our rent is due on the first… not the second. By the third of the month, our apartment complex will start sending out eviction notices. So suddenly this simple change by our bank took on a whole new, highly sinister aspect. How in the world were we going to make this all work? For that matter, how would the thousands of other people in similar situations around the U.S.?
So we sent an email to the contact person at our bank and described our problem. They waited a couple of days and then helpfully sent us a cut-and-paste copy of the notice we had received in the mail. Frustrated, we finally broke down and used one of our generous three free calls to the bank and played through the voice message maze until about ten minutes later we were able to talk to an actual human being. It’s amazing how quickly a living-breathing entity can address your needs. A quick two-minute conversation revealed that direct deposits were available right away. Hurray! We don’t have to move! But then what about those poor souls who get a physical paycheck?
All I can say is make sure your rent isn’t due on the day you get paid, ’cause you’re outta luck.
With our problem behind us, I got to thinking about what the bank was actually doing here. I can understand the need to hold funds for a short time when they are deposited at an ATM or the like… You have to actually collect the checks, etc. But two full business days? Remember that most people get paid on Fridays. That means that if they’re quick (which you know they will be) my bank could theoretically use my money (for investing or whatever) at zero interest, for as long as five physical days before I can touch it (that’s the Friday you deposited it, plus the weekend, plus two more business days). Hell, they might even get another day or two out of you if there happens to be a holiday in there.
So what, you say? It’s only a few dollars interest at most (at least on what we’re making), so what’s the big deal? That’s how banks make money.
No. Banks make money by investing my money and giving me incentive to let them “borrow” that money in the form of low-interest savings accounts and the like.
It’s called “float-time”, and we’re probably going to be seeing a lot more of it in the future… In fact, just this morning I heard about another bit of float time that a certain bank (yes, it was indeed BofA again… what a surprise!) was slipping under the radar. It seems that if you live in another state and have a bank in that state, and decide to move to say, California, and then try to move funds by check to a local Bank of America (which is national), they will hold your money for at least two weeks! Wow! Talk about money for nothin’! They say they do this because they need to “check things out”. Right. But I can transfer funds from Bangkok in seconds.
Whatever. That’s float time.