Bank of First Deposit - BOFD

AAA

DEFINITION of 'Bank of First Deposit - BOFD'

The bank where a check is initially deposited to an account. If the check is drawn on the same bank, it is an "on-us" check that can be settled in-house.

If the check is drawn on another institution, it is presented for payment and either processed through the Federal Reserve System or cleared through private arrangements between banks.

INVESTOPEDIA EXPLAINS 'Bank of First Deposit - BOFD'

The Federal Reserve System was created because, during the financial panic of 1907, many banks failed to clear checks drawn on other banks.

The industry routing numbers developed in the 1940s that appear at the bottom of checks help ensure timely payment, which is usually the same or the next business day. In the 1970s, the ACH (automatic clearinghouse) system was developed to permit the electronic conversion of checks.

RELATED TERMS
  1. Bank

    A financial institution licensed as a receiver of deposits. There ...
  2. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
  3. Automated Clearing House - ACH

    An electronic funds-transfer system run by the National Automated ...
  4. Bank Draft

    A type of check where the payment is guaranteed to be available ...
  5. Account Minimum

    The minimum balance required to be maintained in an investment ...
  6. Average Revenue Per User (ARPU)

    A measure of how much income a business generates, given the ...
Related Articles
  1. Bag The Best Bank Account
    Insurance

    Bag The Best Bank Account

  2. Are Your Bank Deposits Insured?
    Savings

    Are Your Bank Deposits Insured?

  3. Are My Investments Insured Against Loss?
    Home & Auto

    Are My Investments Insured Against Loss?

  4. Who Backs Up The FDIC?
    Options & Futures

    Who Backs Up The FDIC?

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center