Automatic Transfer of Funds

An automatic transfer of funds is a standing banking arrangement whereby transfers from a customer's account are made on a regular, periodic basis without further instruction or action by the customer. A common automatic transfer of funds are through "sweep" instructions, whereby all excess funds in one account are swept into another account. Corporations with multiple subsidiaries generally use this zero-balance account.

Automatic transfers are often used for the regular movement of funds from a checking account to a savings account, or from the account of one spouse to another or to a child. Another common use of these transfers is for overdraft protection, whereby funds are moved from a higher-interest-earning account to cover payments due in another account.

Automatic transfers may also be used for periodic equal payments, such as for mortgages or other loan payments.

As mentioned above, corporations with multiple subsidiaries will often make use of a zero-balance account. Using a zero balance account can help ensure managers pre-approve the activity on company debit cards. This can automatically occur via the transfer of funds from a master account in amounts just large enough to cover checks presented. A zero-balance account also allows for greater control on the distribution of company funds, along with limiting excess balances.

Automatic transfer of funds is one core offerings of both commercial and online banks. (Many operate together, as is the case with the online branch of a major commercial bank like T.D. Bank) Most online banks incorporate the basic commercial banking services, such as deposits into checking accounts or savings accounts, withdrawals from both accounts, transferring funds among accounts, and balance checking. For other products, such as money market accounts and certificates of deposit (CDs), customers generally have to visit a physical commercial branch location.

Cybersecurity among many online banks has become critical in order to prevent making electronic information vulnerable to damage or theft. Cyberattacks may occur when information is transferred across networks as during an automatic transfer of funds. Types of attacks include backdoor attacks, in which a thief exploits an alternate method of accessing a system; denial-of-service attacks, which prevent a rightful user from accessing a system; and direct-access attacks, includes bugs and viruses, which gain access to a system and copy its information and/or modify the system.