DEFINITION of 'Automatic Transfer Of Funds'

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. The most common automatic transfer of funds are through "sweep" instructions, whereby all excess funds in one account are swept into another account. This zero-balance account is mostly used by corporations with many subsidiaries.

BREAKING DOWN 'Automatic Transfer Of Funds'

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.

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