November 29, 2020

Bucks: Making Online Deposits on an Honor System

Go figure — it turns out that most people can be trusted not to lie about the amount of money they deposit in their bank account.

The Pennsylvania State Employees Credit Union 10 years ago started a deposit service called Upost@home. The service lets members enter their deposits in the credit union’s online banking system for immediate credit. Then, customers mail the checks to the credit union in a postage-paid envelope.

And get this: Deposited funds are immediately available for use, to pay bills for instance, and the money earns interest from the day of the online entry.

That’s right. The service works on an honor system. The bank gives customers credit for deposits before it actually receives them. (If the check doesn’t show up within 10 days, the bank reverses the credit.)

The credit union wasn’t totally crazy. It limited the amount that could be deposited to the service to $1,500 initially (users can have their level increased over time), and it limited the number of members who could use the service.

But, still. Wouldn’t people be tempted to inflate the amount of their deposits, to try to earn a little extra interest?

Apparently not, according to Netbanker.com, which alerted Bucks to the credit union’s innovative system. With about 4.5 million items deposited over a decade, totaling $1.4 billion (the average check was $310) , the bank has suffered just $74,000 in losses. That’s a loss rate just or 1.6 cents per item, rivaling rates for branch deposits, Netbanker says.

Would a for-profit bank dare offer such a service?

Article source: http://feeds.nytimes.com/click.phdo?i=0046d3ef1620870eb18aa07f73f0553c

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