Definition of “On-us Items”
How “On-us Items” Work
“On-us Items” vs. “Off-us Items”
Advantages and Disadvantages of “On-us Items”
Definition of “On-us Items”
“On-us Items” are payments made between two individuals using the same bank or credit union. These transactions are considered on-us because the money does not leave the institution but is redirected to another internal account.
Examples of “On-us Items” include payments made via checks, electronic transfers, debit cards, credit cards, and cash withdrawals from ATMs.
How “On-us Items” Work
“On-us Items” provide benefits to both customers and institutions. Since banks cannot hold “On-us Items” for more than one business day, customers gain quicker access to their funds. Financial institutions save money by not utilizing an external network to process the transaction.
For example, let’s assume there are two sisters, Sarah and Hillary, using the same financial institution. When Sarah writes a check to Hillary and Hillary deposits it into her account, the transaction is completed as an “On-us Item” at that institution.
Since this money is still held within the financial institution, it does not need to go through an external network to deposit the funds into Hillary’s account. However, if Hillary used a different financial institution than Sarah, the financial institution would have to use a settlement network to complete the transaction, making it an “Off-us Item”.
Note: There are times when an item may not be considered “On-us” even if processed through the same bank. This can occur if the individuals involved in the transaction have accounts at the same bank but in different states or areas for check processing.
“On-us Items” vs. “Off-us Items”
“On-us Items” are drawn and deposited internally, without needing to leave the bank’s system. The money simply moves from one account to another. Whereas “Off-us Items” must be sent to another financial institution using an external banking system.
| “On-us Items” | “Off-us Items” |
|---|---|
| The originating bank and the receiving bank are the same bank | The originating bank is different from the receiving bank |
| Lower costs for the bank as it performs both sides of the transaction | Higher costs for the bank as it must go through an interbank banking system, which may charge fees |
Advantages and Disadvantages of “On-us Items”
Advantages:
- Faster processing times
- Lower costs for the financial institution
Disadvantages:
- May not always be “On-us” even if the same bank processes the transaction
Explained Advantages:
- Faster processing times: Banks are required to make all “On-us” checks available for withdrawal within one business day under federal law. The bank cannot hold those funds for longer than that.
- Lower costs for the financial institution: By not needing to use an external network to exchange funds, banks and credit unions save money by avoiding additional fees and charges that typically apply.
Explained Disadvantages:
- May not always be “On-us” even if the same bank processes the transaction: If you use a national bank that has multiple regions for check processing and your check deposit needs to be sent to a different region, some of your check deposits may be processed as “Off-us”.
Thank you for your feedback!
Sources:
- FDIC. “Expedited Funds Availability Act.”
- Board of Governors of the Federal Reserve System. “The 2019 Federal Reserve Payments Study.”
- Board of Governors of the Federal Reserve System. “Availability of Funds and Collection of Checks,” See “Availability of Deposits Subject to Exceptions (§ 229.13(h)).”
Source: https://www.thebalancemoney.com/what-is-an-on-us-item-5205481
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