How a Series of Small Deposits in Your Bank Account Could Cause You Problems

Dropping some cash off at the bank should be a quick, routine affair. And it usually is.

In some cases, though, a pattern of small cash deposits can draw unwanted attention.

You won't be in trouble if you're doing nothing wrong. Still, if your deposits add up to a lot of money, then the government might take a closer look.

Here's why.

The $10,000 rule

Banks are required to report large cash transactions. If you deposit or withdraw more than $10,000 in cash at once, the bank files a Currency Transaction Report (CTR). That report goes to the Financial Crime Enforcement Network (FinCEN).

FinCEN isn't looking to hassle everyday people. Its job is to look for signs of money laundering, tax evasion, and other serious crimes.

Remember:

• Depositing $10,000 or more in cash is legal
• A CTR does not mean you're suspected of wrongdoing

In most cases, a CTR is just routine paperwork.

Why a series of smaller deposits can raise flags

People get into trouble when they try to avoid this reporting.

Breaking up a large cash deposit into smaller ones specifically to dodge CTRs is known as "structuring." And structuring is a felony, even if the money comes from a legitimate source.

In other words, trying to avoid the government's attention is the easiest way to get a spotlight shone on your finances.

What happens if the bank thinks something is off

There's nothing wrong with making a lot of cash deposits. People do it every day. But banks do keep an eye out for patterns that look unusual or fishy.

They use both software and human reviews to flag things like:

• Repeated cash deposits just under $10,000
• Deposits that add up to large amounts over a short time
• Activity that doesn't line up with your customer profile -- your job, transaction history, etc.

If something seems off, then the bank may file a Suspicious Activity Report (SAR). SARs are sent to FinCEN, which can then share that data with law enforcement agencies.

Even if a SAR is filed, that doesn't mean the FBI is about to kick your door in. If you've done nothing illegal, then you'll probably never know the report was filed at all.

The safest way to deposit large amounts of cash

Bankers are like doctors; they've seen it all before. Odds are, they won't be all that interested in your deposits.

So just play it cool and…

• Deposit the full amount at once, even if it's over $10,000
• If a bank employee asks any questions, answer honestly

Beyond that, make sure your deposits are earning a decent interest rate. Some high-yield savings accounts earn around 4.00% APY, while the average account only earns 0.39%.

If your bank is paying you a stingy interest rate, then switch to one of our top-rated high-yield savings accounts ASAP.