What is a "Business Day" and how does it affect our finances?

Posted on: 26 May 2020

By: Daniela Bucay

Although we may take the phrase for granted, “business day” can have different meanings to different groups of people, depending on their business. The financial services industry has somewhat cornered the market on business day definition because many businesses depend on these institutions to conduct their work. In this post, we’ll break down what companies like Fig mean by “business day,” why you should care about the Federal Reserve, and how to edit your calendar to avoid financial surprises!

Fast Fig Facts!

  • One business day consists of a weekday (Monday through Friday), from 9 a.m. to 5 p.m.
  • Business days naturally coincide with another time convention, namely, banking hours. Fedwire, which is the Federal Reserve’s electronic transfer and fund settlement system (aka, how banks send money to each other), operates pretty strictly between 9 a.m. and 6 p.m. ET.
  • Bank holidays can mess up your schedule. Let’s say you have a bill that will be considered past due after September 7, 2020. You may think that you have until that day to make your payment. Because Labor Day falls on September 7, 2020, however, you will actually need to make your payment no later than September 4 in order to avoid a late payment. That is 3 days earlier than you initially thought you needed to pay!

Generally speaking, in the United States, one business day consists of a weekday (Monday through Friday), from 9 a.m. to 5 p.m. Although it seems like a small detail, understanding what a business means by business day can have significant implications. For example, Target can tell you that it offers 4-day shipping. You could place an order at 7 p.m. on a Thursday, expecting to receive your items by Monday. Due to business day convention, however, you actually would not receive your items until the following Wednesday.

Business days especially matter for financial services because they affect settling times, which we discussed in our article on ACH basics. Take, for example, Fig. We offer next-day funding for your convenience. If we adapt the Target example from above, we will say that you submit an application for a loan on Thursday at 6:30 p.m. Because of Fig’s business day convention, the funding for your loan, if approved, will not be sent until Friday evening. In this case, you would not receive your funding until the following Monday, but it would still be considered next-day funding. Because of this, we always advise our borrowers to submit applications before close of business, so that if approved, we can send the funds out that same day to settle in your account the following day. We will also let you know when you should receive your funding, so that you do not have to keep track of business days on top of everything else.

Business days naturally coincide with another time convention, namely, banking hours. It is important to note that although some banks may have different operating hours (TD bank prides itself on having the longest hours), banking hours are pretty standardized because they depend on the Federal Reserve, the mother of all banks. Fedwire, which is the Federal Reserve’s electronic transfer and fund settlement system (aka, how banks send money to each other), operates pretty strictly between 9 a.m. and 6 p.m. ET. Most financial institutions, whether they be loan companies or your neighborhood bank, want to operate primarily during those hours to make sure they have all their accounts settled in time to communicate with their larger banking system.

Bank Holidays

Another detail to bear in mind is holidays. You have probably heard the term “bank holiday” at some point or another, but do you know which holidays the Federal Reserve—and therefore all other banks in the U.S.—actually observe? It can get tricky, because state holidays, school holidays, and other holidays may not overlap exactly with bank holidays. I always lamented the fact, for example, that I did not get Presidents Day off of school, even though it counted as a bank holiday. For the full list of holidays observed by the Federal Reserve, visit this page.

Bank holidays can mess up your schedule. Let’s say you have a bill that will be considered past due after September 7, 2020. You may think that you have until that day to make your payment. Because Labor Day falls on September 7, 2020, however, you will actually need to make your payment no later than September 4 in order to avoid a late payment. That is 3 days earlier than you initially thought you needed to pay! We recommend adding bank holidays to your personal calendar, that way, if you know a bill falls around a bank holiday, you have ample time to prepare any alternate arrangements.

At Fig, we know that having all the information you need to make intelligent decisions about your finances matters. That is why we send out emails reminding you of your upcoming payment throughout the week leading up to your next payment. We also send out reminders about any bank holidays coming your way so that you can expect longer processing times if you have a payment clearing, and you can plan your payment schedule accordingly. As a reminder, we never charge change fees, late fees, or any other hidden fees, so if your payment falls around a bank holiday, you can change it with the confidence that doing so will not cost you any money!

Have you experienced any business day snafus? Let us know! Our team is listening at service@figloans.com and on Facebook, Instagram, and Twitter.