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What are Micro-Deposits, And Why Does Stash Use Them?

September 24, 2018

Micro-deposits explained.

2 min read

For many things in life, it’s often a good idea to do a practice run, to make sure that everything is in working order. We’re thinking about wedding rehearsals, job interviews, and marathons.

Banks and other financial institutions conduct their own trial runs when they use something called micro-deposits.

What are micro-deposits?

Micro-deposits are small sums of money that are transferred online, from one financial account to another. The deposits are typically less than $1 and are sent to your account by another financial institution to verify it is the correct account.

Micro-deposits might show up on your bank statement as a temporary credit of anywhere between $0.02 or $0.40. (In Stash’s case, it’s  $0.50.) They are also usually deposited in pairs—so, your statement would show two micro-deposits to your account within one to three business days of linking your accounts.

What are micro-deposits used for?

Banks and other financial institutions use micro-deposits as a security measure. Specifically, they’re used to verify account ownership.

For example, if you’re attempting to link your bank account to another financial account (like an investment account), the new financial institution will want to make sure it has the right connection to another account. So, it will do a test run by initiating a micro-deposit.

A customer will be notified that a micro-deposit has been sent to his or her bank account, and will then receive a notification to verify the amount of the deposit by logging into the account. Once the customer has verified the amounts, the initiating party will withdraw the small deposits.

Why Stash uses micro-deposits

Stash uses micro-deposits for the same reason any other financial institution does: to verify that the customer’s accounts are properly synced.

When you sign up to use Stash, you’ll be asked to link your bank account so that you can transfer money in and out of Stash’s platform. The process usually takes one to two business days at most bigger banks, but if you’re a customer of a small bank or a local credit union, you may need to enter your account and routing numbers manually in order for Stash’s system to properly connect to your account.

We’ll then send micro-deposits to your account to verify ownership before you can start using the platform’s features.

Learn more about the banking system, and keep up with tricky financial terminology, by subscribing to our newsletter.

By Sam Becker
Sam Becker is Stash's financial writer.

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