The myth of next day deposits

Next day deposits are something that many processors claim to have, but few if any actually do.

Hangup #1.) When a business processes transactions on any given day, those transactions must be reviewed before they are authorized to go to a bank account. This process, called risk management, is the final check to stop potential fraud before the money is deposited into a business’s bank account. While there is some automation to this, generally a human must look at the day’s settlement, and decide whether to let the transactions through, or to put a hold on that day’s funds. Processors are normally allowed 48 hours from the settlement date to analyze that days transactions and release them. The earliest that those transactions are available for review is the morning following the day the transactions were settled.

Next day depositing would typically require the removal of the risk management step from the process of a credit card transaction. Most processors are not going to relinquish this necessary step in the transaction process. Since the processor is liable for all of a business’s transactions in the event that the business commits fraud, it would take a great degree of trust and a long and positive processing history for a processor to do this.

Next day deposits are typically seen and work when a business processes directly through a bank, and also maintains a bank account with them. Because the bank has complete control over their account, they can front the money before formal risk management takes place, and go back into the bank account in the case that something is wrong. There are only a few banks that can actually deliver on this but in reality a bank’s endless spool of red tape often offsets the benefit of next day deposits. There are also some processor / bank account combinations that allow next day deposits, but again, this isn’t a service that every business can qualify for because there is too much risk in many situations.

Hangup #2.) Banks have a tendency of holding funds before allowing them to clear, and this can delay transactions from being deposited into a business’s bank account.

Depending on the amount and the situation, banks can hold funds for several weeks before allowing them to be deposited into an account. While it is much more uncommon for this to happen with a business account, some banks still hold funds for transaction deposits. If you find yourself in this situation, you should see if you bank will immediately clear transaction deposits of just find a new bank. For most small businesses, it’s not worth the hassle waiting for deposits because your bank is being picky. The bank is taking no risk on these deposits if you have a legally setup merchant account, so there is no reason they should be holding them for more than a day.

A few tips:

Sometimes something as simple as changing your daily batch time can reduce the time for your deposits by a day or more.

A charge card can be a great tool for small businesses with inconsistent cash-flow because it allows purchasing as needed, but does not carry a month-to-month balance like a credit card. American Express and MasterCard both offer some good charge card programs designed specifically for small and medium businesses.