JPMorgan Chase offering access to direct deposited funds two days early
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."