Methods to Make Deposits to Your Internet Bank Accounts

As I described yesterday, internet banks have several advantages over a brick-and-mortar bank. However, one downside is that making deposits is not as straightforward. There's no branch where you can make a deposit directly into your account.

ACH Transfers

The deposit method that I've used the most for my internet bank accounts is a two-step process. It requires that you have an account at a brick-and-mortar bank or credit union. In your internet bank account you establish a transfer link with that brick-and-mortar bank account. This typically involves providing the internet bank the routing and account number of your brick-and-mortar bank. Most internet banks require a verification step which involves a trial deposit made by the internet bank to confirm you own that account.

Once you have a transfer link established, you are ready to make deposits into your internet bank. First, deposit checks and cash into your local bank. Once those funds are available, you log into your internet bank account and initiate an electronic transfer to pull those funds. This is often called an ACH transfer, bank-to-bank transfer or an electronic funds transfer.

There are a few downsides to this ACH transfer deposit method. First, you may not always be able to travel to your brick-and-mortar bank or credit union. This is one benefit of choosing a credit union that's part of a shared branch network. If your credit union is part of the shared branch network, you can make a deposit at other credit unions in this network which gives you access to credit unions around the nation (see post).

Another downside with the ACH transfer deposit method is that you have to maintain that brick-and-mortar bank account. If it's not a free checking account, you may be charged monthly service fees.

The third downside with the ACH transfer deposit method is the delay. There are two sources of delay. First, the brick-and-mortar bank will likely put a hold on your check when you make the deposit. During this time, the money isn't available. You'll have to wait for the hold to end before you can pull the funds with an ACH transfer. Once the funds become available and you initiate the ACH transfer, you'll then have delays in the ACH transfer process. Some internet banks have fast ACH transfers which can take only one or two business days. Others can take 4 to 5 business days.

Deposits by Mail

Another method to make deposits into an internet bank account is by mail. This is usually limited to just check deposits. Several internet banks such as Ally Bank and PerkStreet Financial offer postage-paid envelopes.

The downside with mailing in your deposits is the delay and the risk of the mail getting lost in the mail. Some internet banks offer free overnight delivery through UPS Stores and/or Mailboxes Etc. PerkStreet Financial allows free deposits using either of them. USAA Bank's service called Easy Deposit uses UPS Stores.

Remote Deposit with a PC or Smartphone

The future of check deposits is remote deposit capture which allows you to scan your checks and deposit them online using your PC or smart phone. This is growing in popularity. Some of the internet banks that have this now include EverBank, Bank of Internet USA and First Internet Bank. Ally Bank has been testing its new service on select customers, and ING Direct is working on it. USAA Bank has long offered its remote deposit service called Deposit@Home and Deposit@Mobile, but it limits this service to those who have a military connection. That's one problem with this service. Not all customers may qualify, or it may take more time to qualify for the service. Another downside is that they may limit the size of the check that can be deposited.

Several credit unions also offer remote deposit. Some of these include Alliant, PenFed and Digital Credit Union. I have more details in my Survey of Banks and Credit Unions with Remote Deposit.

Depositing Cash

One issue with both mailing deposits and remote deposit is that they are only for depositing checks. They're not applicable for depositing cash. When I asked an Ally Bank CSR about how to deposit cash, I was told that I would need to purchase a money order, and then send that in for deposit the same way I would for a check. The downside of this is that there is usually a fee for the money order. PerkStreet Financial describes in its FAQ how MoneyGram ExpressPayment (available in Wal-Mart stores) can be used to deposit cash, but I was told by a PerkStreet CSR that they don't cover MoneyGram charges. I've just been told that MoneyGram ExpressPayment is free for PerkStreet customers to make cash deposits into their accounts.

One other way that you may be able to deposit cash is with ATMs. Some ATMs have a deposit capability, and some newer versions are able to deposit cash and checks without envelopes. When I asked an Ally CSR about this, I was told that wouldn't be possible even if the ATM supported it. To make deposits at an ATM, it appears that the deposit-capable ATM must either be owned by your bank or it must be in a network in which your bank is part of. The CO-OP Network has 1000's of deposit-taking ATMs in 7-Eleven stores. Many credit unions are part of this network.

Even if you can use a deposit-taking ATM, you may not want to. If the ATM gets jammed when you feed it your check or bill, it can be a hassle to resolve the issue.

What Method Do You Prefer?

I've always had free checking accounts at local credit unions or banks. Consequently, ACH transfers have always been my preferred method of making deposits to my internet bank accounts. I'm not a fan of mailing checks or using ATMs for making deposits.

What methods have you used to make deposits into your internet accounts? And how do you make cash deposits?

Edit 3:00pm 10/12/11: Updated info on MoneyGram