FedNow: What To Know About the Fed’s New Instant Payment Service
Have you ever wondered why bank deposits still take a few days to process and online bill payments must be scheduled before due dates when you can send and receive money instantly using Zelle, Cash App and similar payment apps? A new payment service called the FedNow Service will soon change how many financial institutions process transactions, allowing you to instantly pay bills or transfer money between banks and accounts. Read on to learn more about this payment service, when it will be available and how it can benefit you.
See: How To Guard Your Wealth From a Potential Banking Crisis With Gold
What Is the FedNow Service?
FedNow is the Federal Reserve’s new instant payment service that enables participating financial institutions and service providers to instantly process transactions, debiting and crediting bank accounts in real time, 24 hours a day, seven days a week, 365 days a year. The Fed has scheduled the launch of the service in late July 2023, although only a small number of financial institutions and service providers will initially offer the service.
If your bank offers FedNow services, it could mean the end of timing transactions around bank hours, having to remember to schedule online bill payments days before a bill is due, or waiting a few days for money to transfer from your checking account at one bank to your savings account at another.
Which Financial Institutions Will Initially Offer FedNow?
Before a financial institution can provide FedNow services, it must complete FedNow Service testing and certification. Currently, there are 41 FedNow-certified financial institutions and 15 certified service providers. The Federal Reserve hopes that every financial institution will eventually make FedNow available to customers. You can find a complete list of FedNow participants on FRBservices.org, but some of the financial institutions include:
1st Bank Yuma
Alloya Corporate Federal Credit Union
Avidia Bank
Bridge Community Bank
Buffalo Federal Bank
Catalyst Corporate Federal Credit Union
Consumers Cooperative Credit Union
Corporate America Credit Union
Corporate One Federal Credit Union
First Internet Bank of Indiana
Global Innovations Bank
Michigan Schools & Government Credit Union
Peoples Bank
Salem Five Bank
Star One Credit Union
U.S. Century Bank
Who Will Use FedNow?
Banks, credit unions and service providers will use FedNow to provide instant payment services for individuals and business customers.
What are some ways FedNow instant payment services may benefit you? You’ll no longer experience a delay between the date you schedule an online bill payment and the date your biller receives the payment. You will have immediate access to funds transferred to your account from another bank, rather than in a few days. You will also have instant access to direct deposit funds. Bank holidays will no longer delay banking transactions.
Will FedNow Replace Payment Platforms Like PayPal?
FedNow will not replace PayPal or any other payment platform. FedNow will merely enable banks to provide instant payment services for customers. However, some bank customers may no longer require a payment app such as PayPal as FedNow becomes more widely available via financial institutions and the Fed adds additional FedNow services.
If anything, the introduction of FedNow could mean you no longer have to pay a fee to instantly transfer money from PayPal, Venmo and other payment apps to a linked bank account.
What Is the Dollar Limit for FedNow?
The Federal Reserve caps FedNow transfer amounts at $500,000. The default transfer limit for a financial institution is currently $100,000, although financial institutions can choose to lower limits or raise them to the $500,000 maximum.
Is There a Cost To Use FedNow?
Beginning in 2024, financial institutions must pay a monthly $25 participation fee per routing transit number that will provide the FedNow service to customers. The fee is waived for 2023. Per-transaction fees may also apply. It is unknown how much of the cost, if any, may be passed on to customers by any bank or credit union.
Final Take
Although the banking industry has changed significantly over the past few decades with the addition of online banking and services such as Zelle, bank transaction processing has not. However, the introduction of FedNow instant payment services should make banking more convenient by eliminating delays in the posting of online bill payments and funds availability. Not every financial institution will offer FedNow initially, and some may never offer it, but it may be a feature worth considering if you’re looking for a new bank.
This article originally appeared on GOBankingRates.com: FedNow: What To Know About the Fed’s New Instant Payment Service
