What Is a Depository Transfer Check?

A depository transfer check (DTC) is used by a designated collection bank to deposit the daily receipts of a corporation from multiple locations. Depository transfer checks are a way to ensure better cash management for companies, which collect cash at multiple locations.

Data is transferred by a third-party information service from each location, from which DTCs are created for each deposit location. This information is then entered into the check-processing system at the destination bank for deposit.

Understanding Depository Transfer Checks

Depository transfer checks are used by companies to collect revenue from multiple locations, which are then deposited in one lump sum at a bank or other institution. They are also called depository transfer drafts. The third-party information service used to transfer the data does so through a concentration bank. A concentration bank is the organization's primary financial institution, or where it conducts the majority of its financial transactions. The concentration bank then creates DTCs for each deposit location, which is entered into the system. A depository transfer check looks like a personal check, except that "Depository Transfer Check" is written across the top center of the face of the check. These instruments are non-negotiable and do not bear a signature. DTCs are not to be confused with overnight deposits. Businesses are given a key for a secured dropbox. Deposits, which are placed in a bag with deposit slips, are dropped off in this dropbox after business hours. The bank opens the drop box in the morning and deposits the overnight deposit into the business' checking account.

DTCs vs. Automatic Clearing House (ACH) Systems

DTC-based systems have slowly been replaced by Automatic Clearing House (ACH). ACH systems are electronic funds-transfer systems that generally deal with payroll, direct deposit, tax refunds, consumer bills, and other payment systems in the United States. Roughly 14.4 billion deposits and 10.3 billion credits were made via ACH in 2019, which are considered to be faster, cheaper, and more efficient.

Special Considerations

As noted above, depository transfer checks enable companies to better manage their inflows. Corporate cash management is generally managed by a corporate treasurer. This function is important in companies with high incoming and outgoing cash flows combined with low profit margins. Examples of those industries are downstream oil and gas, leading players are BP, Shell, Exxon, Total and mass retailers such as Walmart, Amazon, H&M, Zara and Home Depot. For example, Goldman Sachs has a robust treasury team to ensure its cash is managed in a manner that maintains its value and mitigates several key risks, related to changes in interest rates, credit, currency, commodities, and operations. Cash management is critical to ensuring a company's financial stability and solvency or its ability to meet its long-term financial obligations. DTCs and ACHs can help some organizations track cash inflows. These systems often help organize accounts receivable (AR), along with collection rates.