During my freshman year of college, I faced an ethical dilemma that has led to many interesting debates. When I checked my account balance, I noticed a credit of $1,000. As bank errors go, this one was relatively small. But to a poor college kid who only expected to see $100 in the account, this was like hitting the jackpot. I knew the bank had mistakenly deposited the money. However, when I tried to do the right thing, the teller assured me there was no mistake. So at this point, would the money be yours to spend?
What Happens if a Bank Mistakenly Deposited Money in Your Account?
Mistakes are a part of life. People aren’t perfect and technology can create errors. But what should you do when the bank makes an error in your favor?
Noticing the Error
In all honesty, my first thought was “Free money!” At that time in my life, I was working 40 hours a week and going to school full-time. So, it could have gone a long way toward improving my quality of life. But deep down, I knew it wasn’t mine to keep. And if I tried, I would probably get caught.
To this day, I’m still not sure if it was an accounting error or a simple mistake on the teller’s part. Although it was tempting to keep it, you should report these errors as soon as you notice them. Unfortunately, this isn’t one of those instances where the “finders, keepers” rule applies. Even if the bank insists there was no mistake, don’t spend the money because it will come to collect it eventually.
Better to Be Safe Than Sorry
Sure, there are times people spend the funds and get away with it. But more often than not, you will have to pay it back if a bank mistakenly deposits money and you use it.
It doesn’t usually take long for someone to notice the money is missing from their account. When they do, the person will contact the bank immediately to fix the error. Even when no one reports the errors, financial institutions conduct audits to catch mistakes just like this. And if someone notices the extra money in the account, they don’t need permission to remove the funds. So if you already spent it, you could find yourself in hot water.
What Are the Penalties if You Try to Keep It?
As you would expect, there will be penalties if you try to keep money that isn’t yours. For one couple, it led to criminal charges. So, it’s best to assume the bank will realize they have mistakenly deposited money into your account and will reverse the transaction.
However, this could create a serious problem if the money isn’t there. It could send your account into the red, leading to overdraft and late fees. And if it happens repeatedly, it will also affect your credit score.
Furthermore, the bank will conduct an investigation. If they discover the missing funds, they can freeze your accounts or even file a police report. Not only will you be ordered to repay the money, but it could also include criminal charges. Depending on the amount, you could face charges for theft, property loss, or receiving stolen property, all of which carry heavy fines or jail time. The penalties will be even harsher if you attempt to close the account, transfer it to another account, invest it, or gift it to family and friends.
What Should You Do If a Bank Mistakenly Deposits Money?
So, what should you do if this happens?
- Don’t spend any of it. If money appears in your account and you don’t know where it came from, don’t touch it. Don’t spend it, don’t transfer it, don’t give it away…just let it sit in the account. Tampering with the funds could have huge consequences.
- Report it immediately. The next step is to notify someone immediately. Try to include important details about when you noticed the error. It’s also wise to take down the name, time, and date of when you contacted the bank. Make sure you keep records of all communication on the issue in case anyone has follow-up questions.
- Wait for the results of the investigation. When they find the mistake, the bank will conduct an investigation to determine the origin of the funds. They must establish that it was a mistake, not an unexpected gift from someone. Afterward, they will reverse the transaction. Banks usually respond within 10 days, but longer investigations can take up to 6 weeks. If you have questions about the process, you can find more details about the timelines in your account agreement.
- Follow-up for results. Some banks are better at communication than others. If you haven’t heard back from your bank within 45 days, contact them for a progress update.
- Monitor your accounts. The fact that mistakes like this happen is a good reason to regularly review your finances. Therefore, I make it a habit to monitor my accounts. I use a combination of credit reports, online banking, and account notifications to keep tabs on my finances. On more than one occasion, it has helped me spot accounting errors and fraudulent activity as soon as they happen.
Food for Thought
Mistakes happen, both as a result of human and technological errors. But, life has a way of correcting mistakes.
There is always a chance that you will get away with keeping the money. But even if you find a legal loophole that allows you to keep it, there is a difference between legality and morality. These hypothetical situations should make you think twice about what you would do, especially if the situation is reversed. In my experience, what goes around comes around. And if I were the one with the missing funds, I hope that whoever received the money would take actions to correct the mistake.