What is Direct Deposit?
In any job, career, or business, getting paid is high on your list of priorities. Traditionally, people relied on paper checks for payment.
Paper checks can get lost or stolen, though; even if they don’t, you have to run to the bank or (thanks to mobile tech) take a picture of the check to deposit it.
With direct deposit, you can cut out these intermediary steps and receive your money much more quickly.
How Does Direct Deposit Work?
Direct deposit is an electronic payment made between two banks accounts. There’s not much else to it.
It’s most commonly associated with your paycheck. Every employer at this point at a minimum heavily encourages you to set up direct deposit the moment you’re hired.
Many even require you to set it up.
Direct deposit is used in other situations as well, such as bill payments, tax refunds, and income not related to your occupation.
How Long Does it Take to Set Up?
The part of the setup process you’re responsible for takes all of 30 seconds. All you have to do is fill out a company direct deposit form with your bank information and you’ll be done.
However, it takes from a few days to a few weeks to fully set up your direct deposit. Your first paycheck or two might be in physical form during this time.
Is Direct Deposit Safe?
Concerns surrounding direct deposit safety are numerous, and we can see why. Increasing societal reliance on technology means hackers have more numerous and more lucrative targets.
No payment methods is 100% safe; there will always be thieves and fraudsters.
But direct deposit is just as safe (if not safer) than paper checks.
Paper checks can get lost, dropped, stolen, etc. If any of these happen, you don’t just lose your paycheck; you could lose your entire bank account and even your identity once a thief has your banking information.
By it’s very nature, direct deposit eliminates the chances of any of these things happening.
If something does happen to your paycheck, direct deposit makes it more traceable since it’s all electronic. You can’t exactly find a paper check with ease if you dropped it on the sidewalk yesterday.
Lastly, fewer people are required to handle direct deposits, meaning less chance of fraud. It’s usually one person entering the information in, another double checking the info, and then one more person sending out the direct deposits each paycheck.
They can’t easily redirect your payment somewhere else.
As for paper checks, real people have to cut the check. Real people can easily redirect your check to their own bank account.
Benefits of Setting Up Direct Deposit
You Get Your Money Faster
The most obvious upside to direct deposit is the speed with which you get your money. Once your employer confirms the payment, it takes about a day only because the bank has to process the deposit.
If it’s a weekend or holiday, it’ll take a bit longer, but people with paper checks still won’t have an advantage because the banks are closed anyways.
You Get Your Money Earlier
Companies generally want employees to use direct deposit for safety reasons we’ve already discussed. In addition, making direct deposit payments is as easy as clicking a few buttons, whereas paper checks all need to be printed and folded.
For these reasons, many companies pay direct deposit employees a day earlier than employees that opt for a physical check.
Sure, you aren’t earning any more money and it’s only one day, but those who are savvy with their finances know that time is money.
Absent or Not, You Get Paid
Sick? Out on vacation? Just taking a personal day to veg out?
If you have direct deposit, you’ll still get paid whether you’re cramped over in your cubicle or napping on the beach in the Bahamas.
Paper check? Nope, they’ll hold it for you until you come back.
Seems like just a convenience thing, but this can actually save you in certain situations. If you’re in an unfortunate paycheck to paycheck situation, direct deposit can mean the difference between eating and not eating if you’re out sick for a few days during pay week.
We might be exaggerating a bit, but you won’t notice how life-saving this could be until you need your money but can’t get it without flying back home and stopping by your office.
Divide Your Paycheck Between Multiple Accounts
Direct deposit allows you to split your paycheck up between multiple accounts. This is an excellent way to put your savings on autopilot and reduce the temptation to spend wastefully.
Combine this with automatic bill pay and your money will do all your work for you.
People with direct deposit don’t have to visit the bank. This is a big deal because banks are barely open past business hours; if you opted for a paper check, you’d have to fight rush hour traffic and long bank lines (or wake up early on a Saturday) to deposit your check.
Even mobile deposits take a bit of time, albeit not much. But mobile deposits sometimes give you issues, such as being unable to read the writing on a paper check.
As we discussed earlier, direct deposit is generally safer than paper checks. If anything happens, there’s an electronic “paper trail” within your employer’s payroll software as well as within the bank’s software.
Just be careful not to lose your direct deposit form so your bank account number doesn’t fall into the wrong hands.
Peace of Mind
Aside from the physical and safety benefits, direct deposit frees up space in your brain to worry about other things. No longer will you have to remember to deposit your paycheck because your employer will do it for you.
You’re Saving the Environment
This probably isn’t the first thing on your mind, but setting up direct deposit means you’re using less paper. You’re playing a small part in helping the environment!
How to Set Up Direct Deposit
Direct deposit is easy to set up. Each employer might have a different direct deposit form, but the process is almost always the same.
1.) Gather Important Information
To set up direct deposit, you’ll need the following information:
- Bank routing number (Differs by bank, make sure you choose the correct one)
- Bank account number (which account you want your employer to send funds to)
- Bank address
- Voided check (write “VOID” across a check. Optional at some employers, but highly recommended to ensure direct deposit information accuracy)
Some people want their paychecks to be split up into multiple accounts; for example, someone might want a portion of their paycheck to go straight to savings.
Many companies oblige by letting you specify dollar amounts or percentages for each bank account.
If you need your money to flow into multiple accounts, gather the account number for each account you want to send funds to in addition to your main one.
2.) Fill Out The Direct Deposit Form
Employers usually hand these to you with you W4 when you’re hired. If not, you can just ask for one or perhaps print it off if they have them internally online.
Once you get your hands on a form, enter all the information you gathered into the proper boxes. Make sure you write down every single account.
Triple check for accuracy; you don’t want your paycheck going to someone else!
Attach a voided check to the form for additional verification, add your signature, then hand it to your boss, HR, or the payroll department.
It’s best to do this in one go as soon as possible while you’re at work. You run the risk of losing the form if you fill it out at home.
3.) Now, You Wait
Direct deposit can take up to 2 pay cycles before it takes effect. While you’re waiting, you’ll have to live with paper check.
Be extra careful with those checks.
When your company stops cutting you checks, your direct deposit is most likely active. However, always do your due diligence. Check your bank statement next pay day to see if the money hit your account.
In addition, you might be able to ask payroll about your direct deposit if you have any concerns about it.
4.) Optional: Change Your Direct Deposit
Whether you’re switching banks or just want to adjust your direct deposit account percentages, changing your direct deposit info is simple. Just ask for a new direct deposit form and follow the exact same process.
Get Your Money Now
Direct deposit is quite simple on your end to set up. There’s no longer much reason to hold out against it either, seeing as it’s generally safer and faster than paper check.
Set up direct deposit so you can get your paycheck earlier and with less hassle!