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Direct deposit is a convenient way to receive your paycheck or other types of payments. It eliminates the need for a physical check and allows the funds to be deposited directly into your bank account. However, in some cases, a bank may reject a direct deposit. This can be frustrating and may cause delays in receiving your payment. This article will explore common reasons why a bank may reject a direct deposit and what you can do to prevent or resolve this issue. Understanding why a direct deposit may be rejected can help you ensure that you receive your payments on time and avoid potential problems.
Why Would a Bank Reject a Direct Deposit
Some of the major reasons why a bank would reject direct deposit are as under:
- The account number is invalid
- There are insufficient funds available to honor the request
- The deposit was made from an unrecognized or unlicensed entity
- The deposit amount is too large for the current account balance
- There are discrepancies in the name or other information contained in the deposit and that contained in your most recent account statement
- The bank suspects fraudulent activity and has determined that it cannot confirm that you are authorized to make a direct deposit into your current account
- The bank needs more information regarding the source of the funds before they can honor your request to make a direct deposit
- You have a negative balance and they do not want to automatically debit that amount from your current account without your consent
- The bank has determined there are suspicious activities associated with your account and does not want to allow any further activity until they can investigate further and resolve any issues concerning your account
- The cheque is not signed by the drawer.
- The cheque has already been paid.
- The cheque is post-dated.
- There is a discrepancy in the name of the payee and drawer.
- The amount of the deposit is not one whole number.
- The payee’s bank account number is invalid or missing.
- There are more than 3END in a row on the cheque.
- You have deposited a foreign currency cheque.
Let’s elaborate on each reason.
The account number is invalid.
One major reason your direct deposit gets rejected is that the provided account number needs to be validated. The cause of this is a human error, as you might have noted or entered the wrong account number. And sometimes, the wrong bank name with the correct account number can also reject your deposit.
Thus, it is always suggested to double-check the account number you are entering and also ask the payee to confirm the details provided in the bank, as this will save plenty of time.
There need to be more funds available to honor the request.
Another major cause of the direct deposit amount being rejected is that no or fewer funds are available in the account of the depositor. Thus, this will automatically reject your direct deposit request, as you need to have a complete amount in your account to honor the request.
Before applying for direct deposit, make sure you have sufficient balance in your account. Rejection of your direct deposit due to a low balance can hurt your PR.
The deposit was made from an unrecognized or unlicensed entity.
Your direct deposit request is always properly checked by your bank, so many factors can reject the direct deposit request. When you try to make a direct deposit from any unrecognized or even unlicensed account, the bank might reject this request because this will portray you as a fraudulent person trying to hide your identity. This issue can also further ban you from making a direct deposit, so never try to make such attempts.
The deposit amount needs to be bigger for the current account balance.
Another cause for your direct deposit to get rejected by the bank is your direct deposit limit, as some accounts have limited direct deposit limits while others have more. So, it would help if you increased your direct deposit limit before applying for it, as this will save you from facing troubles and other issues.
There are discrepancies in the name or other information contained in the deposit and that contained in your most recent account statement.
Mismatch information of the account details becomes the major cause for your direct deposit amount to get rejected.
The bank suspects fraudulent activity and can’t confirm that you are authorized to make a direct deposit.
Sometimes you can make wrong transactions or enter the wrong name for the transactions, which will create suspicion in the eyes of the bank. However, you might get rejected for the direct deposit you have applied for. Thus, every detail needs to be entered properly.
The bank needs more information regarding the source of the funds before they can honor your request to make a direct deposit.
These days there are too many questions asked by the bank regarding your money, and the very important question to ask is the source of funds before approving your request for direct deposit.
You have a negative balance, and they do not want to automatically debit that amount from your current account without your consent.
If your bank account already has a negative balance and you have applied for a direct deposit, then the bank would not try to deduct the balance from your account without your consent.
The bank has determined there are suspicious activities associated with your account and does not want to allow any further activity until they can investigate further and resolve any issues concerning your account.
If your bank sees dubious buys, they might choose to investigate. This could be set off by buys that don’t accommodate your typical example, were started from a spot where you don’t reside or were transported to a location that is not your home.
Assuming that this is the motivation behind why they put your bank account being scrutinized, they probably froze your account. That freeze should be set up, as it will forestall further crime. On the off chance that it was set up unintentionally, however, the misconception can, as a rule, be settled with a straightforward call.
The drawer needs to sign the cheque.
We are always in a hurry, and often we need to remember a lot of chores, and sometimes our work still needs to be completed. So if you sign a cheque for direct deposit, ensure all the necessities are fulfilled properly. The sign on the cheque is the most important thing because, with a sign from the drawer, the cheque can be drawn, which will create a problem for direct deposit.
The cheque has already been paid.
We often get multiple cheques, and then we need to remember which cheque we have cleared and which has not. So, presenting the same cheque again that has already been paid will only create a mess, and it will not be deposited again. Thus, you need to make sure that you separate the cheques that have been paid from the unpaid cheques.
The cheque is post-dated.
Sometimes we get the cheque for direct deposit, put it in our drawer, and need to remember its last date, which can create a mess for us. When you enter a cheque of post-date, then the bank will automatically reject it, and your direct deposit will not proceed. So, you need to present the cheque before its last date as then you will not have to face any rejections.
There is a discrepancy in the name of the payee and drawer.
You need to have proper details of the payee and the drawer before signing a direct deposit request. Any error in such details will cause rejection, and you must reach out to the bank to clear those. For instance, if you have entered the name of the payee or the name of the drawer wrong, this will instantly revoke your direct deposit request, and you will face issues regarding this.
The amount of the deposit is not one whole number.
If you are not aware of the rules of direct deposit, then your deposit request might get rejected for multiple purposes. For instance, if you have yet to enter the amount of the deposit in the whole number, then this can also create an issue in your direct deposit approval, and you might face rejection of your direct deposit request.
The payee’s bank account number needs to be validated or added.
One of the major issues is when the payee’s account number is not mentioned properly and there is any error or missing number. Then you will find that your direct deposit request will get rejected, and you will face complications. Thus, before entering the number, be very careful and enter the account number properly so everything runs smoothly in the deposit process.
There are more than 3END in a row on the cheque.
If you have signed and written a cheque to be deposited in the employee’s bank account, but you have crossed the cheque improperly. If it has 3END in a row, then this deposited cheque will be rejected by the bank as any improper marks on the cheque make it suspicious that someone has amended the cheque details. However, for security reasons, the bank will reject that cheque and inform you to get a new cheque to get it cleared.
You have deposited a foreign currency cheque.
For instance, if your company is getting profit in foreign currency without informing your bank, you have presented the cheque for depositing, this will also create a mess for you.
Foreign currency cheques must be deposited with proof of income and other details required by the bank. Provide the complete verification of your foreign currency cheque so that this deposit is accepted and your amount will get stuck.
Frequently Asked Questions
What can you do if a direct deposit is rejected?
You can file a complaint against your request, and soon you will receive a response for why your deposit is rejected.
Why would a bank reject a direct deposit?
There are multiple reasons why the bank can reject direct deposits, and most of the reasons are mentioned in this article.
What to do if your bank rejects a direct deposit
If your bank is rejecting your direct deposit request, you can ask the bank why your deposit is rejected.
You need to be careful when opting for bank transactions as very few mistakes can cause you issues, which will be very difficult for you to handle.
Thus, direct deposit can be rejected by the bank for multiple reasons, and these reasons can be easily solved if you have proper knowledge about them. Moreover, if you take proper care of your bank details, there will be no issues with direct deposit. Thus, clear all the issues, and your direct deposit will always be accepted.
Hello! I’m Annan Bhadra, a financial specialist and passionate writer. I have always been captivated by finance and its potential to empower individuals and communities. My academic journey began with an O level from the British Council, where I studied Accounting and Commerce. I then pursued my A level, focusing on International Business, also at the British Council. My passion for understanding the global economy led me to East West University, where I earned a degree in Economics. These educational experiences gave me a strong foundation in the financial world and fueled my desire to help others navigate their financial lives.