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I have a bunch of accounts at Fidelity and use their app to deposit checks on my phone. Each account has a daily deposit limit that is based on a number of factors, but the most important appears to be the current balance of the account (higher balance gives you a larger daily deposit limit).

For my business account, I withdraw most of the money at the end of the quarter to pay taxes and myself. Afterwards, my deposit limit is low so I can't use the app and have to mail checks in.

I've vigorously complained to Fidelity about the low deposit limit, but they refuse to increase it. It seems odd since I've been a Fidelity customer for 15 years and I have all my retirement accounts with them.

Why do banks impose deposit limits like this? What is the risk, especially for long-term customers like myself?

  • 1
    Just a speculation, but it's probably a third party vendor handling the deposit and some level of risk assumption. There's not a lot stopping you from depositing that check twice with two different bank apps. Between your phone and Fidelity is probably an intermediary. – quid Jan 31 at 19:25
  • @HartCO's answer is basically right, it's to stop fraud (which is rampant via mobile deposit). Some (most?) FIs probably don't have the functionality to implement rules like this as fine-grained as to sort out "dedicated" customers like yourself, plus it's likely that there wouldn't be data to support that actually reducing fraud (longterm customers are often targets). At any rate, if they're not going to budge, you may want to shop around. Some FIs have higher limits for business customers - which may be high enough for you - that aren't dependent on balance. – dwizum Jan 31 at 20:47
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There are three types of risk being avoided here. The first is the most obvious and blatant check fraud. Because the law requires policies to be applied uniformly, then exceptions have to have policies as well. In other words, if Policy A does not work for customer X, then customer X has to qualify under a broad exceptions rule to make Policy B available to them. It simply costs less to mass deposit online than to have a person walk in the door, place themselves on camera and in the same police jurisdiction as the bank and commit fraud in person. Blanket policies have no marginal cost in this case.

The second is money laundering. Any large deposits could potentially trigger a money laundering investigation. Having a person deposit the funds in a branch gives the bank or other financial institution a chance to "benignly" interrogate the customer.

The third is kiting. Even a financial institution has been caught kiting before. Some elements of the check clearing system are quite dated. The US is decades behind other parts of the world. You can still do kiting in the US and get away with it. Nonetheless, kiting is a crime and it is one a bank is responsible to detect. Kiting becomes easier if you can deposit electronically.

Accepting deposits create liabilities and placing a physical limit on deposits reduces them. A physical check can have fingerprints on it, an electronic check cannot. An in-person deposit requires a person to go on camera, an electronic deposit could even happen in the International Space Station.

The risks for long-term customers is incredibly low. That said, there are plenty of fraud cases of good firms that had a sudden change in management or accounting that suddenly became a bad risk. Blanket policies are the problem and the inability to underwrite individual firms and people. Of course, the fees would have to go way up if they were to allow all potential customers to undergo individual underwriting.

  • Nice answer. Since I had to look it up: for non-US readers kiting = write or use (a cheque, bill, or receipt) fraudulently. – TripeHound Feb 1 at 7:59
  • Not sure your first paragraph makes sense. You say check fraud is the first type of risk, but your third is kiting which is a type of check fraud. Also, policies can be specific to individuals. Banks can have an overdraft policy that includes waiving fees at their discretion, as well as exception processing (paying rather than returning an item) based on account history. Regarding money laundering, the identity of an account holder is already known to the bank, suspicious deposits/behavior will be flagged if made via mobile app, ATM, or in person, so not sure that makes much difference. – Hart CO Feb 1 at 17:32
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Adding to the other answers, this is also depending on the bank.

I have accounts with several banks, and for example BoA and Chase have increased those limits after some time of proper usage (=no fraud) to 50000$ - far more than I'd ever need (the account balance is typically only three or four digits).
So, as much as you won't like it, changing bank might solve your issue. Maybe you could simply open an additional account just for depositing checks.

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I don't think you'll get a satisfying response. The standard line is that the limit is intended to prevent fraud because you still have physical copies of the checks you (or someone else) could attempt to deposit them at another bank. I'm not sure that perceived risk is very great, since they can typically verify checks immediately, could require bank account number as part of endorsement, and could reverse deposits if funds weren't available due to double-cashing attempts, but that's their reasoning.

They could easily monitor customer behavior and set the limit according to expected deposit amounts, much as they do behind the scenes setting NSF/OD decision logic on a per customer basis, but seem to have decided that's not worth the risk/cost.

If you have a high volume of checks and this is a common problem you could look into remote deposit options.

  • "simply reverse the deposit if funds weren't available due to double-cashing attempts," But if the person who wrote the check DOES have enough money to cover double the amount, then it could take a little time before his bank figures out that you've deposited the same check twice. And I suspect that is the normal case: usually when I write a check it is for much less than half the balance in my account. If there was no limit, a dishonest person could get a bunch of checks, deposit them all through the phone app, deposit them again physically, withdraw a bunch of money and disappear. ... – Jay Jan 31 at 20:24
  • ... I don't know if the fraud would be caught quickly because both transactions have the same check number, or if no one would catch it until the payer figured out he was being double-charged. In any case, certainly a pain for the bank and the payer to deal with. – Jay Jan 31 at 20:25
  • @Jay I was thinking mostly about instant verification, but perhaps that doesn't actually do much to prevent double-cashing. – Hart CO Jan 31 at 20:39
  • @Jay - the Federal Reserve bank requires checks deposited via mobile apps to be endorsed as "For mobile deposit only" which would (theoretically) prevent them from being deposited "physically" after having been deposited via mobile app. Many FIs do not enforce this strictly though (yet). And that also doesn't stop someone from doubling the deposit via another bank/account mobile app. – dwizum Jan 31 at 20:44
  • @dwizum That requirement seems impractical too, you endorse it for mobile deposit, the app fails to work for whatever reason, then you are stuck unable to deposit it at your local branch. Not surprising they don't enforce it. Requiring an account number with endorsement would be a wise thing, but most don't even do that. – Hart CO Jan 31 at 21:00

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