Automatic fund transfer is a banking arrangement that allows a customer to transfer funds from his account to another account. The account or accounts receiving the transfer of funds can be owned by the same customer or by another customer or a company.
An example use automatic transfer of funds is for transferring funds from a customer’s savings account to his son’s savings account for savings or for allowance purposes. Another common use of automatic transfer of funds is for transferring from a checking account to a third party account that is owned by a company or service provider as the customer’s payment to that particular company for a service.
Corporations with many subsidiaries also use automatic transfer of funds with sweep instructions whereby all funds from an account are swept into another account.
Automatic transfer of funds can also be used for overdraft protection. In this case, funds are transferred from a higher-interest earning account to cover payments due in another account.
In order to setup an automatic transfer of funds, the bank customer must fill up an enrollment form authorizing the bank to automatically transfer funds to another account. This transaction is commonly done offline in the banking premise. However, in some banks with an advanced online banking system, automatic fund transfers can be setup online. Customers who are registered to the bank’s online system can setup automatic transfer of funds online and then activate enrollments through the bank’s automated teller machines.
