Zero Day Hold Versus Next Day Funding on a Credit Card Processing Statement

When looking at your credit card processing statement, you may see one of these fees listed. Essentially both of these terms refer to the same thing. Typically when a merchant batches out or closes out the transactions for a certain day of sales, the processing bank places those funds on hold for one or two additional days as a precaution against potentially fraudulent charges, charge backs, etc. Then the funds are released and move through the processing bank to the merchant’s bank. This means that it can take 2-3 days for the merchant to receive the money from credit card sales on a particular day.

Now consider the term Zero Day Hold. This means that the processor releases the funds right away so the merchant can receive the funds the next day or the day after depending on when they batched those funds. Please keep in mind that it takes additional time for the money to be deposited into the merchant’s bank account once the processor releases the money. (You will recall that when you deposit a personal check from a relative or someone else into your bank account, those funds are not always readily available the day you made the deposit.) The term Next Day Funding is really the same concept since the processor is funding the money the next day.

However, more and more banks are providing a true Next Day Funding solution for merchants who have their business checking account and merchant account with the same bank. When the merchant batches out a day’s sales, then the bank advances those funds right to the merchant the very next day. Since the funds are all contained in the same institution, the funds are released to the merchant almost instantly. Many merchants might feel that the best solution for their business. Something to consider though is whether the merchant account fees are going to be higher than with a third party processor (Often banks charge more). A business owner should also consider whether they really need the funds deposited that quickly into their checking account. I would dare to say that the business is teetering towards failure if a one or two day delay in receiving funds is the absolute required feature of a merchant account.