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AUTOMATIC TRANSFER SERVICE ACCOUNTS:

Deposit accounts offered by commercial banks, credit unions, savings and loan associations, and mutual savings banks that automatically transfer funds from interest-paying savings account to checking accounts when needed to process checks or to maintain minimum balances. Automatic transfer service (ATS) accounts effectively function as interest-paying checking accounts and are considered as one type of checkable deposits. Other checkable deposits are demand deposits (standard checking accounts), negotiable order of withdrawal (NOW) accounts, and share draft accounts.
An automatic transfer service (ATS) account is the integration of a standard checking account and a standard savings account. The "service" is an agreement between the bank and the customer to automatically transfer funds from the savings account to the checking account if necessary to cover a check or to maintain a minimum balance in the checking account.

This service combines the liquidity found in a checking account with the interest payments of a savings account. Such ATS accounts function much like negotiable order of withdrawal (NOW) accounts and share draft accounts. The difference is that ATS accounts are actually two integrated accounts, one checking and one saving.

Some Recent Numbers

M1
June 2004 (Billions)

ComponentAmount

Currency$676.8
Checkable Deposits650.7
Demand Deposits321.6
Other Checkable
Deposits: Banks
187.2
Other Checkable
Deposits: Thrifts
141.9
Nonbank
Travelers Checks
7.7

Total M1$1,335.2

The table to the right presents values for M1 and its key components, currency and checkable deposits, for selected years. The "Other Checkable Deposits: Banks" and "Other Checkable Deposits: Thrifts" categories contain ATS accounts.

A New Kid on the Block

ATS accounts were introduced and became widely used in the 1970s. These accounts were first offered by savings and loan associations and mutual savings banks as a means of competing with traditional commercial banks. At that time traditional commercial banks were the only institutions that could legally offer checking accounts (demand deposits).

With high rates of inflation and high interest rates, banking customers looked for ways to retain liquidity (as in spendable money) while also generating interest payments. ATS accounts were offered to meet this need and to attract deposits to savings and loan associations and mutual savings banks. While such accounts skirted existing banking regulations they became legal in the 1980s. With this legality, traditional commercial banks jumped on the competitive bandwagon and also began issuing ATS accounts.

A Couple of Others

ATS accounts are one type of interest-paying checkable deposits that emerged in the 1970s. Two others are NOW accounts and share draft accounts.
  • NOW Accounts: Savings and loan associations and mutual savings banks issued what they termed NOW accounts--negotiable order of withdrawal. A "negotiable order of withdrawal" is essentially another term for "check." While these were basically checking accounts, an interest was paid on the balance of funds.

  • Share Draft Accounts: Credit unions got into the competitive checking account market by offering share draft accounts. Because "draft" is another term for "check" this too was effectively another type of checking account, but which also paid an interest on the balance in the account.
While demand deposits were once the only checking account option and continue to account for half of the checkable deposits issued by traditional commercial banks and other depository institutions, ATS accounts play a significant role in the M1 money supply. Together with share draft accounts and NOW accounts, these "other" checkable deposits are almost one-forth of the M1 money supply.

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Recommended Citation:

AUTOMATIC TRANSFER SERVICE ACCOUNTS, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2021. [Accessed: August 3, 2021].


Check Out These Related Terms...

     | checkable deposits | demand deposits | share draft accounts | automatic transfer service accounts | currency | Federal Reserve notes | near monies | plastic money |


Or For A Little Background...

     | money | money functions | medium of exchange | M1 | saving | liquidity | banks | financial markets | business |


And For Further Study...

     | money creation | fractional-reserve banking | banking | Federal Reserve System | monetary economics | monetary base | monetary policy | debit card | monetary economics |


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