What Are Same-Day Funds?

In finance, same-day funds refer to money that is available for use on the same day that it is deposited, usually in real time. These funds can be withdrawn in cash or transferred to other financial institutions or individuals almost immediately upon receipt. Most same-day transactions are done through electronic wire transfers. Types of same-day funds include federal funds, the Clearing House Interbank Payments System (CHIPS) funds and transfers within individual banks.

In a federal funds transaction, or fedwire, the sending bank's federal reserve account is debited in the net payment amount, and the receiving bank's account is credited the same amount. This process takes place electronically. It allows large amounts of money to be sent almost instantaneously to institutions within the country.

Another way for banks to send same-day funds is through CHIPS. In contrast to the government-owned fedwire, CHIPS is owned by its member financial institutions, which are primarily large banks. Banks that are not members of CHIPS often have accounts with banks that are members. This allows smaller banks to do business through CHIPS.

When CHIPS transactions are processed funds are received on the same day, but payments are made on the basis of daily netting rather than in real time. For instance, Bank A might send $150,000 to Bank B through CHIPS in the morning. Bank B then sends $100,000 to Bank A in the afternoon. Rather than processing the transactions separately, as they occur, CHIPS would make a net payment of $50,000 to Bank B.

Most banks also offer free real-time wire transfers between their account holders. These can often be done through online banking. Transfers can be one-time, or they can be set up to reoccur periodically. The sender usually must know the account number of the person receiving the funds. Same-day funds sent between individuals from different banks may incur fees.

Next-day funds are not available for use until the business day following the transaction. These include most consumer deposits, such as paychecks. Cash deposits, however, are sometimes available on the same day.