There are many benefits to direct deposit that paper checks cannot provide. Direct deposit makes payday simpler by receiving your pay at a sooner time every time.
Some examples include a higher level of safety and security, quicker deposit times, cost reduction and environmental advantages. Certain financial institutions can waive specific fees for accounts that have implemented direct deposit.
This is an important factor to consider since certain businesses require employees to sign up for direct deposit. They may also offer pre-paid debit cards. But, you may have to pay fees when using these cards.
Because direct deposit is an Automated Clearing House type of transaction, it is a quick and simple way to get your paycheck. Instead of getting a paper check, your money will go directly to your checking or savings account once the direct deposit is set up.
Signing up for direct deposit can help you eliminate continuous trips to the bank and remove the risk of losing your paycheck. Your money is typically available immediately without having to wait for one or two business days to pass for the check to clear.
Compared to paper checks, direct deposit is considered as a more secure method for payment. Since the Social Security Administration started to use it in 1976, the administration has not lost a payment. This is because the payments go directly to the account of the beneficiary.
Another reason that direct deposit is safer than paper checks is that you remove the risk of check fraud and other scams. An estimated 4.3 billion dollars are paid by financial institutions because of check fraud.
The principal reason several employers have started to give direct deposit choices is it reduces the costs for the business. The government alone is estimated to spend an extra 51 cents per person in business costs in order to process a check instead of using direct deposit.
Furthermore, on top of the excessive cost of paper checks, they are making a negative impact on the environment because of the amount of paper and ink used to produce them each day. Opting for direct deposit indirectly helps the environment and reduces the negative effect of opting for paper checks.
One of the best reasons for an employee to use direct deposit is that you receive your paycheck faster than waiting for a paper check to clear. A paper check can take up to one to two business days to clear in the bank and for those funds usable in your account.
Additionally, if you are paid on a Friday, then you will not obtain your funds until the next week. Since financial institutions do not count weekends as business days, it will take longer for your payment to arrive. This can also happen when you receive a check before a holiday.
Depending on the financial institution, having direct deposit set up can save you money. Certain banks will charge a fee every month, also known as a monthly maintenance fee or membership fee. The majority of the times banks and other financial institutions are willing to waive that fee automatically every month, as long as you are receiving a certain amount through direct deposit.
Direct deposit can help you save plenty of money from these monthly fees. For example, if you are being charged $10 on your checking account for maintenance, then having direct deposit can save you $120 every year. These fees can be avoided by making the simple choice of opting for direct deposit. Additionally, having a consistent pay cycle can assist you in eliminating overdraft fees that happen from automatic billing, which has their individual benefits.
When you decide to enroll in direct deposit, you will be prompted to give your checking or savings account information or both. This is for you to decide where you want to place your direct deposit. If you want to save money, there are ways in which direct deposit can help you save money with minimal complications. All you need to do is assign a specific amount to your savings account.
As stated before, certain employers will not issue paper checks and will only provide the direct deposit option for their employees. They may also provide a prepaid debit card to employees. It is important to remember that these cards often have utilization fees for purchases and making withdrawals out of an ATM.
Enrolling for Direct Deposit
When you arrange your account for direct deposit for the first time, the process is simple. The majority in the United States will provide direct deposit alongside other payment methods available for employees.
In order to enroll in direct deposit, you must give your employer with information on your accounts, either your checking, savings or both. This information can include the routing number of your bank and account number. There are times where you may have to give your employer a blank or voided check. Moreover, you might have to complete a form for human resources or the payroll department, but this will vary from employer to employer.
After enrollment, you may have to wait up to a couple of weeks to start receiving direct deposits automatically in the accounts you have assigned. Thus, it is possible that you will obtain another paper check before the payments will fall directly into your account. This may vary depending on the time you placed your direct deposit request.
Government or state programs can provide you with the option to direct deposit your benefits into your bank account. Setting up direct deposit on your benefits can assist you in helping you track your benefits. You can submit a dispute in a simpler way when problems occur, like underpayment or overpayment.
Perhaps you are already obtaining your government benefits straight to your checking or savings account. This typically occurs with Social Security Administration or with the Department of Veteran Affairs (VA). There are specific states that let Unemployment Insurance funds to be set up for direct deposit to your bank accounts.