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The IRS announced on Friday that it had started sending the money.
“Some Americans may view the direct deposit payments as pending or provisional payments in their accounts prior to the official March 17th payment date,” the IRS said in its statement.
Some organizations like Chime, a start-up for fintech banks, have decided to make the funds available to their customers early on. This led some people to wonder why other traditional banks hadn’t done the same.
Understanding why some payments were made early while others didn’t fall until March 17 depends in part on what is known as the ACH network and how it works.
The ACH network is a payment system that enables direct deposits and payments to accounts at US banks and credit unions nationwide.
Every ACH payment or direct deposit order has a corresponding date, according to the National Automated Clearing House Association or Nacha, the organization that oversees the ACH network.
Millions of direct payments are expected to come out on March 17th, the date chosen by the IRS. Government officials have not said exactly how many checks will be sent through this first wave.
Two important things will happen on that day.
First, the US government channels the funds to banks and credit unions.
Second, banks and credit unions have a deadline by which to make the funds available for people to withdraw (usually 9 a.m. local time).
It’s no mystery where the money is from when the first payment file was submitted on Friday March 12th to when all recipients have access to the money on Wednesday – it’s still with the government.
Organization that monitors the ACH network
Banks and credit unions have not yet received the funds. All payments made in advance meant that these financial institutions advanced the money based on instructions they received about who to pay how much.
Fund settlement is scheduled for Wednesday at 8:30 am Eastern Time.
“This is literally when the government funds the settlement accounts of banks and credit unions with the Federal Reserve,” Nacha said in a statement.
“It is no mystery where the money is from when the first payment file was submitted on Friday March 12th to when all recipients will have access to the money on Wednesday – it still rests with the government “said the organization.
According to the Consumer Bankers Association, there is usually a standard waiting period of at least two days before accounts are charged for these types of transactions. This gives the government time to correct potential errors. In addition, institutions can resolve potential cases of fraud.
Consequently, financial institutions that advance the funds earlier do so at their own risk.
How quickly the payments reach people also largely depends on the government’s schedule.
“It is up to the sender, in this case the IRS, to decide when to provide the money, and the IRS chose March 17th,” said the Consumer Bankers Association and eight other banking and credit union industry groups in a statement.
The IRS has said the vast majority of the estimated $ 160 million 1,400 stimulus checks will be sent by direct deposit.
Subsequent payment rounds will also take place via an ACH billing, which is scheduled every Wednesday after the payments are made, according to the finance department.
If these funds fail, the government will reissue the payments as checks.