Why is direct deposit required for credit builder accounts?

Question

It seems all credit builder accounts (e.g., Chime, Varo Believe) require direct deposit. Why should it make a difference on how the money is put into the account?

Answer 1

Likely for the same reason that banks often require direct deposit in order to waive fees on checking accounts.

The cost of setting up and servicing an account is (mostly) fixed. The money a bank makes, on the other hand, is generally based on the amount of money going through the account. From the bank's perspective, setting up an account that someone keeps a small amount of money in and doesn't use to buy things is a net loss.

Most people have only one direct deposit source and whatever account that direct deposit is directed to becomes that person's primary account where most of their money goes to and most of their spending flows through. Sure, it's often possible to ask your employer to direct deposit your paycheck to multiple banks or to transfer the bulk of the funds to a different account shortly after payday. But that's more work than most people are willing to go through. So the requirement to have direct deposit is bank's way of more-or-less ensuring that you're using the account as your primary bank account and, therefore, that the bank is going to maximize the amount they make on your transactions and balances.