Where does the money actually go?

[Kathyan]

When you transfer money from your bank account to someone else's account (not at the same bank), the money goes out of your account immediately, but it doesn't go into the recipient's bank account for 3 to 4 days. So where does it go in the meantime?

[Ethel]

It earns money for the bank. This is soon to be outlawed as there is no good reason for it.

[Kathyan]

Thanks Ethel. But where is it for the 3 or 4 days?

[Ethel]

It is sat in the banks coffers, gaining interest.

[PrinceRainie]

it goes into the "inter bank clearing system" similar to when you write a cheque and the money takes a few days to clear if it involves 2 different banks.
However in the advent of electronic banking, this can be done instantly now, and the banks basically rob you of a couple of days interest...!!!

[tpreece01]

In almost every other country you'd pay a fee for such a transaction. In the UK it's free of charge, but the banks earn interest on the money for a couple of days - which really just covers costs rather than returning a profit.

This is due to change in the not too distant future with an HSBC initiative, working with the other 'clearing banks' to make the whole process faster.

When BACS was set up, it was set up for 4 day transfers, there's a lot of IT investment, technology, testing and planning going into the new system. It's been delayed a bit as it should have been in place towards the end of this year, but watch out for more info on the news next spring.

[VillageVicar]

That gargantuan amount of money is also used for 'spot' investment. Banks loan their 'float' among other banks, they take averaging of the daily, weekly, monthly, and quarterly amounts on float and invest that it broader markets, treasury loans, etc. So in essence, your couple of thousand pounds becomes part of the profit mechanism of the bank's millions and billions of pound annual successes.

But come Christmas time and just try to get a free calendar out of them! The scallywags!

Fr Bill

[jules77]

Ok - the clearing system - Day 1 - (which must be a working day), you pay the money into your bank for the credit of a recipients bank account. Day 2 - the money reaches the clearing house (Bank of England). Day 3 - the money reaches the recipients bank, and is then credited to the recipients account which is usually reflected on Day 4.

[einsteinsdog]

The banks , being clever people will soon start to make charges just for having a current account, because they are the last ones to loose out