A night depository is an overnight drop box service provided by banks that allows account holders to make money deposits after regular banking hours.
A night depository service is always available for making deposits 24 hours a day, 7 days a week. The deposits can be made up of checks, cash, coins, or credit slips. The next business day, money is collected by the bank and deposited into the relevant accounts.
Many banks provide a night depository service for account holders to deposit money at any time, either day or night.
A night depository is useful for small business owners who mainly deal with cash and checks and who cannot visit the bank during business hours.
The night depository does not limit the amount of cash or the number of checks that are deposited. It also accepts coins. The money should be deposited in special bags, which are put inside a drop box and operated with a key.
How Does a Night Depository Work?
The night depository service provided by banks requires that the deposit contents are placed inside special lockable bags. The bags can either be one-time-use envelopes or reusable envelopes. The account holders also need to place a deposit slip in the envelope with the money deposit.
The account holders are required to sign a night depository agreement and may be charged a monthly fee to access the deposit box. They will be provided with a key to operate the deposit box, which is typically located at the exterior of the bank building for money deposits after banking hours. The next business day, an appointed teller collects the deposits and processes them.
Generally, the deposits are credited into the appropriate bank accounts on the same day that the bags are opened; however, according to the night depository agreement, an account holder can request to open the bag in his/her presence at the bank, which, in turn, delays the process of posting the funds.
In the absence of any such requirement, the bank opens the bags and processes the deposits the following business day.
Advantages of a Night Depository
Night depository services provide additional security to small businesses that deal with large amounts of cash and checks. They do not need to store money at their business locations, which will make them vulnerable to theft. Hence, the night depository is useful for small business owners who can deposit money at their convenience.
It is advisable to use a night depository instead of an Automated Teller Machine (ATM) when a large amount of money and/or many checks are being deposited. Though ATMs can be used as a depository system, there are limits on the amount of cash and the number of checks that can be deposited; also, they do not accept coins.
Moreover, the night depository can save the clients from any additional fees that are charged by the bank on ATM transactions over a certain limit.
Disadvantages of a Night Depository
Account holders who do not opt to be present at the bank while opening the special bags must be able to trust bank employees who are responsible for processing the night deposits and eliminating the chances of theft or errors.
In addition, for the night depository, account holders are required to mention the account number, amount of deposit, and other relevant information correctly on the deposit bags. The bank will not credit the funds if any of the required information is either incorrect or not provided. It is a critical consideration for business owners who need money urgently for business transactions.
For the night depository service, the bank usually charges a monthly fee, which is an additional expense for account holders.
Night Depository vs. ATM Deposits
Normally, banks allow account holders to make ATM deposits at their branches. According to the Federal Deposit Insurance Corporation (FDIC) regulations, deposits must be posted by banks on the same day the account holders make the deposits.
As per U.S. law, all bank ATMs should display the cut-off time for same-day deposits. If ATMs are available on the premises of the bank building, the deposits made on the ATMs during business hours will be same-day deposits.
According to the FDIC, banks must credit the client’s account on the day of pick-up at the offsite ATM instead of the same day of the deposit. Although ATM deposits are more convenient than night depository services, ATM deposits are vulnerable to theft.
Also, there is a limit on the number of checks and the amount of money that can be deposited in an ATM. Thus, for deposits involving large sums and many checks, it is recommended to use a night depository service.