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Many Americans could be seeing green this Wednesday, March 17.
And that’s not just because it’s St. Patrick’s Day.
Wednesday marks the official “payday” when many of the $1,400 stimulus checks should be deposited.
Yet some Americans may have seen the cash already cross their accounts.
President Joe Biden gave the government the go-ahead to start sending the checks when he signed the American Rescue Plan into law last Thursday.
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The IRS announced on Friday it began sending out the money.
“Some Americans may see the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of March 17,” the IRS said in its statement.
Some organizations like Chime, a fintech banking start-up, chose to make the funds available to its customers early. That prompted some people to question why other traditional banks had not done the same.
Understanding why some payments were made early, while others won’t drop until March 17, comes down, in part, to the so-called ACH Network and how it operates.
The ACH Network is a payment system that enables direct deposits and payments to accounts at U.S. banks and credit unions nationwide.
With every ACH payment — or direct deposit — instruction, there is a corresponding date, according to the National Automated Clearing House Association, or Nacha, the organization that oversees the ACH Network.
On March 17, the date the IRS has selected, millions of direct payments are slated to go out. Government officials have not said exactly how many checks will be sent through that first wave.
On that date, two key things will happen.
First, the funds will move from the U.S. government to banks and credit unions.
Second, the banks and credit unions will have a deadline by when they have to make the funds available to people for withdrawal (generally 9 a.m. local time).
There is no mystery where the money is from the time the first payment file was transmitted on Friday, March 12 to when all recipients will have access to the money on Wednesday — it is still with the government.
Nacha
organization that oversees the ACH Network
Banks and credit unions have not received the funds yet. So any payments that were made ahead of time meant those financial institutions were advancing the money based on instructions they received on who was to get paid and how much.
Settlement of the funds is scheduled to happen at 8:30 a.m. Eastern time on Wednesday.
“This is literally the moment in time when the money will be transferred from the government to banks’ and credit unions’ settlement accounts at the Federal Reserve,” Nacha said, in a statement.
“There is no mystery where the money is from the time the first payment file was transmitted on Friday, March 12 to when all recipients will have access to the money on Wednesday — it is still with the government,” the organization said.
Typically, there is at least a two-day standard waiting period before accounts are funded in these kinds of transactions, according to the Consumer Bankers Association. This gives the government time to fix any potential mistakes. It also allows institutions to troubleshoot for potential fraud.
Consequently, financial institutions that advance the funds earlier are doing so at their own risk.
How soon the payments reach people also largely depends on the government’s timeline.
“It is up to the sender, in this case the IRS, to decide when it wants the money to be made available and the IRS chose March 17,” the Consumer Bankers Association and eight other banking and credit union industry groups said 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 rounds of payments will also occur via an ACH settlement scheduled each Wednesday after the payments are issued, according to the Treasury Department.
If those funds do not go through, the government will reissue the payments as paper checks.
