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. Average Revenue Per User (ARPU)

    A measure of how much income a business generates, given the ...
  6. Money Market Account

    An interest-bearing account that typically pays a higher interest ...
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?

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center