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

Depositing money in your savings or checking account is something you'll probably do often over the course of your life. But it may come as a surprise that making a series of small deposits could actually cause some problems for you.

You need to be aware of when and how you could possibly face legal and financial scrutiny if you make deposits in a certain pattern that trigger the attention of authorities. Here's what you should know.

Structuring can be a big problem when making bank deposits

You're probably wondering how making deposits in your own bank account could ever be a problem. It's simple: You could have an issue if your actions are seen as "structuring." Here's why.

If you deposit more than $10,000 in cash in your bank account at one time, your bank is required to report this behavior and to keep a record of it. The Banking Secrecy Act of 1970 mandates that banks keep records of larger cash deposits in an effort to prevent financial crimes. Banks must file a Currency Transaction Report, even if you deposit just a penny over $10,000.

Many people -- especially those who may not want these reports filed -- are aware of this regulation. As a result, sometimes people break up their big $10,000 deposit into several small ones so they don't trigger the reporting requirement. This is called "structuring deposits," and it is illegal regardless of whether the money you are depositing came from legal activity or from illegal activity.

Now, this doesn't mean it is always unlawful to deposit more than $10,000 even if you break up the deposit. This behavior becomes a crime if the purpose of breaking up the deposits was to evade the currency reporting requirements.

Banks must file a suspicious activity report if they suspect structuring, which could trigger a full investigation and possibly criminal penalties.

How to avoid problems with deposits

The good news is, most people are not going to be depositing $10,000 in cash in their bank accounts or savings accounts regularly -- either all at once or in a series of independent transactions -- so most people don't really need to worry too much about this.

And if you do have a large deposit of $10,000 or more to make, you shouldn't really have a problem making it. The bank or financial institution has the responsibility of filing the report, and as long as the deposit is above board and you aren't trying to evade taxes or launder money, you shouldn't have any issues.

The main thing is to avoid behaviors that could make bank officials suspicious because even if you're innocently depositing small sums that add up to $10,000, you may trigger unwanted attention if the bank thinks you're trying to hide something. If you have concerns, you can always talk to your bank about the best way to make sure you're making large cash deposits in a way that won't cause a problem.

Fortunately, having to deposit large amounts of cash is generally a good problem to have. Just be sure you aren't dividing up your bank deposits in a way that could make it look as if you have something to hide and you should be in the clear.