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Bank of First Deposit (BOFD)

Bank of First Deposit (BOFD)

What Is a Bank of First Deposit (BOFD)?

A bank of first deposit (BOFD) is a bank at which an individual initial deposits a check into their account. In the event that the issuer of the check in like manner banks at exactly the same financial institution, clearing the check is known as a "on-us" item. In the event that the check was drawn from another institution, the bank getting the check would group this transaction as a "travel" thing.

Grasping Banks of First Deposit (BOFD)

At the point when a depositor draws a check from the very institution that composed the check, this transaction is called an "on-us" thing, where the depositor can promptly cash the check or deposit it into any account he holds at that specific bank. Moreover, on-us things can manifest as electronic debits or transfers.

To illustrate the significance of BOFDs, one need only consider a paycheck. Let us expect that an individual deposits their paycheck into his retail bank, which is named Bank A, and that his employer moreover executes with Bank A. In this scenario, the money basically moves starting with one account then onto the next, all under a similar rooftop, which makes for a swifter clearing process.

Contrarily, in the event that a worker conducts his business at Bank A, yet his employer works through Bank B, the check consequently must go through a private clearinghouse or one more outside institution. This perpetually defers the cycle for a check to go through, consequently, an individual must stand by longer to access or clear the deposit on his well deserved cash.

Normally, for the principal scenario to work, the employer's account, which is alluded to as the "drawing account," must contain an adequate balance to cover the paycheck cut to an employee. Generally talking, on-us things benefit banks, who ordinarily earn revenue from both the gaining and giving gatherings, with these transactions.

In a lesser-used context, a bank of first deposit (BOFD) likewise flags an institution to which a check would be returned in the event that the check isn't paid.

BOFD and the Federal Reserve System

The U.S. Federal Reserve System was organized in the aftermath of the financial panic of 1907. As of now in U.S. history, many banks were neglecting to clear checks drawn at different banks. A lack of trustworthy credit hindered growth in numerous sectors, albeit the agriculture industry was hit especially hard.

All of this activity set off broad panic that liquidity issues inside the banking and trust industries could leave American consumers stone cold broke. This fear of bank insolvency prompted a flood of bank runs, where masses of bank customers simultaneously pull out their deposits. In response, the Federal Reserve developed the bank of first deposit ideal.

During the 1940s, the introduction of routing numbers to the bottoms of checks assisted banks of first deposit with working with a developing volume of transactions. This nine-digit mathematical code recognizes the banks and other financial institutions that cycle checks. Specifically, the initial four digits of any routing code assign the Federal Reserve Bank situated in the district where the BOFD is found. The next four digits mean the specific financial institution. At long last, the last digit arranges the check.


  • At the point when a customer deposits a check at an institution that contrasts from that used by the check issuer, the check must be cleared through a private clearinghouse or some other third-party entity.
  • The bank of first deposit (BOFD) is a term meaning the banks where customers first deposit checks into their accounts.
  • In the event that a customer deposits a check at similar bank where the issuer conducts business, this activity is called an "on-us" thing.