Direct sends involve bypassing the usual and standard processes used to clear checks. Instead of the depository bank posting the check to the proper account and then waiting for confirmation from the drawee bank to arrive over the course of a few days, the depository bank makes a direct contact with the drawee bank. The validity of the check is confirmed, and the funds are immediately available to the depositor. The drawee bank in turn moves forward with an immediate debit to the account that the check was written on.
The advantage of this immediate clearing process for the most part applies to the depositor. In the event that there is a reason for delaying the shipment of goods until the check clears, going with a direct send allows the vendor to receive quick assurance that the check is good. The vendor can then immediately prepare the purchased goods for shipment. As a result, the individual or entity making the purchase will receive the products in a shorter period of time.
Direct sends can also be used to make scheduled payments to vendors just before the payments are due. This has the advantage of being able to maintain control of the funds for as long as possible. In the event that the check is drawn on an account that bears interest, this approach can result in a significant increase in the amount of interest income generated for the current financial period.
Different regulations govern the use of direct sends in various jurisdictions. Above and beyond the laws established by the country of jurisdiction, many banks and other financial institutions have specific requirements that must be met in order to make use of direct sends. In many cases, the drawee bank will charge a fee to the account holder for expediting payment of the check. It is not unusual for the depositor bank to also charge a fee to the recipient of the check in order to initiate the process of clearing the check early.
Generally, banks tend to impose fees that discourage the use of direct sends on checks made out for smaller amounts. Depending on the degree of automation used in the bank’s internal systems, direct sends can require manual intervention that is somewhat time consuming. For this reason, a bank may want to discourage frequent use of this type of clearing process unless there are factors that make the use of direct sends in the best interests of the depositor.