Same day funds are money that can be used immediately upon deposit, often through electronic transfers. Federal funds and Clearing House Interbank Payment System (CHIPS) are two ways to send same-day funds. Overnight funds are not available until the next business day.
In finance, same day funds refer to money that is available for use the same day 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 These funds can be withdrawn in cash or transferred to other financial institutions or individuals almost immediately upon receipt.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 made through electronic transfers. Same-day fund types include federal funds, Clearing House Interbank Payment System (CHIPS) funds, and transfers within individual banks.
In a federal funds, or fedwire, transaction, the sending bank’s federal reserve account is debited the net amount of the payment, and the receiving bank’s account is credited the same amount. This process takes place electronically. It allows you to send large amounts of money almost instantly to institutions within the country.
Another way for banks to send funds the same day is through CHIPS. In contrast to government-owned wire, CHIPS is owned by its member financial institutions, which are primarily large banks. Banks that are not CHIPS members often have accounts with member banks. This allows smaller banks to do business through CHIPS.
When CHIPS transactions are processed, funds are received the same day, but payments are made on a daily clearing basis rather than in real time. For example, Bank A could send $150,000 to Bank B via CHIPS in the morning. Bank B then sends $100,000 to Bank A in the afternoon. Instead of 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. This can often be done through online banking. Transfers can be one time only, or can be set to repeat periodically. The sender generally must know the account number of the person receiving the funds. Funds sent the same day between people at different banks may incur fees.
Overnight funds are not available for use until the business day following the transaction. These include most consumer deposits, such as paychecks. However, cash deposits are sometimes available the same day.
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