Your paychecks will soon arrive faster, thanks to an ACH upgrade

Your paychecks will soon arrive faster, thanks to an ACH upgrade

Good news, America: Soon it'll take less than a day for you to get paid. 

Right now, there's a built-in lag of one or two days (sometimes more) between when your company initiates your paycheck and when you actually get your money via direct deposit. That's not even counting the extra days a "payroll glitchcan cost you, which sucks if you have a bill or rent check due.

That's set to finally change — with a new upgrade to our decades-old payments network.

One reason paychecks take so long currently is that money is still transferred from bank to bank via the Automated Clearing House, a system about 40 years old that banks must sync with only once a day. Since activity isn't updated in real time, a bank making a transfer might miss the receiving bank's daily window, for example, thus delaying the transaction.

Now new rules mean banks can start processing same-day payments, the nonprofit that oversees the ACH system — NACHA, or the National Automated Clearinghouse Association — announced Friday. This first phase of the update will require receiving banks to sync up to the system three times a day.

The changes mean pesky payroll mistakes can get fixed faster: Frank Fiorille, senior director of risk management at payroll company Paychex, told Bloomberg that errors reported by the afternoon may now be rectified by end-of-day.

Without the ACH update, people whose paychecks come late may need to rely on credit cards or short-term loans.
Source: 
Vik Jolly/AP

And, in general, workers can start to expect to see faster paycheck deposits: A NACHA study suggests 95% of top financial institutions in the U.S. may start offering same-day payment, in many cases for payroll, Bloomberg reported.

That's really good news for anyone whose late paycheck has put them in a tight spot.

For the wealthy, getting paid a day or two late is no big deal, but 46% of Americans have less than $400 in emergency funds — meaning they're essentially living paycheck-to-paycheck. 

For those workers, even one week's delay can spell credit card debt, or worse: Some may feel compelled to turn to predatory payday loans, which frequently target low-income consumers and have charged interest rates in excess of 652%. 

The new payments upgrades will roll out over the next two years.

According to NACHA, later phases in 2017 and 2018 will speed up debit transactions (including bill pay) and require that all same-day payments be available for withdrawal by end-of-day.

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James Dennin

James is a staff writer covering money and millennials. Send your tips and your money problems to jdennin@mic.com.

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