Also known as a daytime window, a day cycle refers to the time frame required by an Automated Clearing House (ACH) to process a financial transaction. Depending on what time of day the transaction is initiated by the sender, the ACH may be able to successfully deliver the payment to the recipient’s bank account. Many financial institutions provide guidelines to their customers identifying the latest hour in the day that a transaction can be implemented and still credited to the receiving account for that business day.
An alternative to the day cycle is known as the night cycle. This approach still functions in much the same manner, with the difference being that the transaction is initiated after a certain hour of the day and is not received and credited to the receiving account until the following business day. Typically, transactions that are initiated after a certain hour in the afternoon will not be settled until some time the following business day.
One of the easiest ways to understand how the day cycle functions is to consider a payment tendered through the ACH. In order for the payment to credit the same day at the receiving bank, it must be received by a certain time of day. For example, if the receiving bank’s cut off time for crediting and debiting accounts is 2:00 p.m., the payment must reach the bank prior to that time. If not, the funds will not be available to the recipient until the following business day.
Understanding the day cycle for a given financial institution is very important, especially when a payment needs to be tendered quickly in order to avoid late fees or other penalties. Typically, businesses that want payments credited by vendors on the same day will initiate the transaction sometime before noon. This is especially important if the vendor is located in a different time zone from the business, since the determination of when the payment is credited to the vendor’s bank account depends on the vendor’s local time zone. When an international transaction is involved, it may be necessary to execute the transaction early in the morning in order for it to be received and credited on the same business day.
Some banks do offer funds transfer options that expedite the receipt of a payment. Often, this service is available at an additional charge. Unless there is a pressing need to have a payment credited instantly, taking the terms of the day cycle into consideration is usually enough to ensure the payment is received and credited within a reasonable period of time.