Oct 19, 2022 - Economy & Business

JPMorgan Chase offering access to direct deposited funds two days early

People walk past a Chase Bank on Broadway in New York on Oct. 14.

People walk past a Chase Bank on Broadway in New York on Oct. 14. Photo by Michael M. Santiago/Getty Images

JPMorgan Chase on Wednesday will begin offering certain customers access to directly deposited money up to two days before the funds officially hit their accounts.

Driving the news: Chase said it will offer the early-access funds to its 1.4 million Secure Banking customers, whose accounts require no minimum opening deposit and don't charge overdraft fees.

  • The service won't come with any fees and applies to payroll payments, tax refunds, government benefits and pensions, covering nearly 9 in 10 direct deposits.
  • JPMorgan follows financial institutions like Capital One, Fifth Third and a host of digital banks in offering the service.

Why it matters: The sooner people can get their money — especially low-income folks like many of those in Chase's Secure Banking program — the better for their finances.

  • "One of the more antiquated aspects of our financial system can be the time often required for deposits to clear, such as with funds hitting a checking or savings account," Bankrate.com senior economic analyst Mark Hamrick tells Axios in an email.
  • "The newer option to have early direct deposit is a positive one for account holders, speeding access to their money (typically paychecks) as long as there is no added cost to the consumer, or account holder."

How it works: When banks receive direct deposited funds from a payor, they receive a digital file signaling that the money is coming about two days before it actually hits the customer's account.

  • "We very rarely see any issues with that, which is why we're very comfortable with the very limited risk," Ryan MacDonald, Chase's head of growth financial products, tells Axios.
  • "If there is, by any small chance, an issue where the funds reversed, we would not hold the customer accountable."

Yes, but: Chase also has a motivation to offer such a service: It provides an incentive to customers to sign up for direct deposit, which is cheaper for the bank to process than physical checks.

  • Less than half of payments made to Chase Secure Banking customers are direct deposited, MacDonald says.
  • "Electronic payments are faster," he says. "Getting access to those funds for these customers is important."
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