We can consider complaints about banks making mistakes when they process payments. This includes wrongly delaying or failing to make a payment, repeating payments, or giving the wrong information about payments. We don’t have the power to set rules about how banks process payments.
Electronic payments to accounts at the same bank happen straightaway. Those to accounts at other banks take longer and depend on when the payment was set up, the payment type, and when the bank processes the payment. Payments between banks consist of the following steps:
- A customer instructs his or her bank (the sending bank) to make a payment.
- The sending bank checks the customer has enough money in the account for the payment.
- The sending bank prepares an electronic file, along with other transactions, for the bank whose customer is receiving the payment. This collection of individual transactions is called a "batch".
- The sending bank forwards the batch to the Reserve Bank, which transfers the value of the batch between the sending and receiving banks’ accounts at the Reserve Bank. This is called "settlement".
- Once settlement is complete, the Reserve Bank forwards the batch to the receiving bank. This is called "interchange".
- The receiving bank credits the payment to its customer’s account.
Banks used to batch and process payments overnight, but nowadays they do this frequently each business day. This gives customers faster access to deposits made into their accounts. More frequent processing also means banks are likely to take the money for scheduled or future electronic payments earlier in the day.
If such payments aren’t successful the first time because there isn't enough money in an account, a bank may try again later in the day. This could incur a fee, so be sure to check you have enough money available. Also check that your bank does try a second time. Some don't.
Banks generally won’t process payments to accounts at other banks over weekends or on public holidays. Payments made on a non-business day will be processed the next business day.
Also, if you set up a payment late in the day, the bank will generally send your payment the next business day. Banks stop sending payments at a certain time each night so they can update your account and transaction information. Cut-off times depend on the payment type and can vary bank to bank. Check with your bank.
Once you set up and confirm a payment, your bank will take the money from your account and put it into a batch to await processing. This immediately reduces the available balance in your account. If your account pays interest, you will usually continue to earn interest until the batch is sent to the receiving bank for processing to the recipient’s account. The amount of interest may depend on the timing of processing.
Banks generally won’t process payments to accounts at other banks over weekends or on public holidays.
Processing delay didn't entitle customer to clean out account
Jordan used his debit card to pay a courier fee. A month later, the transaction was processed and charged to his account. Jordan's account didn't have enough money in it, and he went into unarranged overdraft. Jordan complained that the bank caused the delayed processing of the transaction and then charged fees on an overdraft that wasn’t his fault. He wanted the bank to correct his transaction records and reverse the fees.CASE 2
Close of business extends beyond 5pm
Ali had a savings account that would earn her bonus interest, regardless of withdrawals, as long as the account balance was higher at the end of the month than at the start. Ali wanted to withdraw a large amount and looked on her bank’s website for withdrawal information.CASE 3
Preferred method had potential for late payment
Ravi cleared his credit card each month on the due date by the "bill payment" method. Under this method, the transaction wasn't processed straightaway and the bank didn't receive the money until the next business day. Since this was after the due date, the bank charged a late payment fee and interest.
Cheques, although in declining use, still generate complaints, usually about how long it takes to clear funds. A cheque, once deposited, can take three to five working days to clear, and even longer for overseas cheques. If you deposit a cheque into your account, check with your bank that the money has cleared before you consider it yours.
How cheques are clearedWhen you deposit a cheque issued i...
A direct debit authority gives an individual or company permission to take funds directly from your bank account. A typical example is when you arrange a direct debit with your power or telecommunications company so your monthly bill is automatically paid from your account.
To set up a direct debit, you complete a direct debit authority form from the company (which is then called a direct debit i...
New Zealand banks don't have to accept cheques from overseas, and may not accept them from some countries, so check with your bank before taking a foreign cheque as means of payment. Foreign cheques take longer to process, and don’t go through the New Zealand cheque clearance system.
ClearanceBanks clear foreign currency cheques in one of two ways.
By negotiationThe bank converts the foreign che...