Accredited ACH Professional (AAP) Practice Exam

What is the term for the first bank that a check is deposited or transferred to?

1. Payee's Bank

2. Payee's Depository Financial Institution

3. Bank of First Deposit

4. Originator's Financial Institution

The correct answer is: Bank of First Deposit

The term for the first bank that a check is deposited or transferred to is commonly known as the Bank of First Deposit. This institution plays a critical role in the check processing system as it is the initial point where the check is presented for payment. Once the check is deposited, the Bank of First Deposit verifies the authenticity of the check and begins the process of collecting the funds from the bank on which the check is drawn. The significance of this term is also tied to the way in which checks are processed within the banking system. It establishes a clear point of entry for the check into the banking system, facilitating further processing and settlement between financial institutions. In contrast, other options such as the Payee's Bank or Payee's Depository Financial Institution refer to the bank where the individual or entity receiving the check (the payee) holds their account, which may be different from the initial bank where the check is deposited. The term Originator's Financial Institution pertains to the bank that originally issued the check, rather than the first point of deposit.