With an abundance of benefits to having direct deposit, it is important to understand how you can set up direct deposit to receive benefits and wages. Direct Deposit even works for most government benefits such as your stimulus check and other forms of federal aid.
Familiarizing yourself with direct deposit will leave you better prepared to take control of your financial stability and receive your funds sooner.
What is Direct Deposit?
Rather than receiving paper checks from your employer and having to take a trip to your bank, direct deposit allows you to receive earnings directly into your bank account without the hassle of a check.
Not only does it save you a trip to your bank, but you can often get your money faster and save money on your bank’s maintenance fees. Additionally, money is available immediately rather than waiting for a check to clear.
Obtaining Direct Deposit Through Your Employer
Setting up direct deposit with your employer for the first time is a simple task and most employers will provide direct deposit to their employees.
You will need to complete a direct deposit form with your employer that contains banking information as well as provide your employer with a voided check. This process can take between a few days and a few weeks so you may receive one more paper check before direct deposit begins.
How is direct deposit similar to an EBT Card?
You are probably already familiar with a debit card and the similarities that it holds to an electronic benefit transfer (EBT) card, but have you ever considered the similarities between an EBT card and direct deposit? EBT cards can receive monthly deposits for food and cash assistance, but this was not always the case.
There was a time when food assistance was provided with paper coupons that could easily become lost, stolen and damaged. Additionally, it is worth knowing that while food assistance cannot be applied to direct deposit, some states do allow you to set up cash assistance to direct deposit. This would then allow you to receive your cash assistance to your bank account rather than your EBT card.
What are the Advantages of Direct Deposit?
There are numerous advantages to having direct deposit in addition to the added convenience of not having to visit your bank to deposit a check.
With direct deposit, a paycheck will clear and funds will become available to you immediately rather than having to wait for a check to clear, most banks will take 1 to 2 business days before all of the funds are available.
Direct deposit ensures that you will have your funds payday morning, regardless of when employers normally hand out paper checks. Since they post immediately, you will not have to wait until after a holiday or weekend.
Some banking institutions provide rewards points or cash back offers when you set up direct deposits with your employer. While the availability of this does vary by financial institution, this is a great way to earn money back on your purchases or receive bonus cash just for having direct deposit.
Speaking of money related benefits, does your banking institution charge you a monthly maintenance fee or membership fee? Most banks will waive this fee if you meet minimum direct deposit requirements.
Each bank can set its own requirement on how much money must be deposited each month through direct deposit, but on average it is between $800 and $1,200 monthly.
Looking to save more money and utilize a savings account? The employer’s direct deposit form was mentioned previously, but it actually does more than allow you to establish direct deposit.
When you are completing the direct deposit form, most forms will give you the option of applying your paycheck to more than one account.
This would allow you to receive the bulk of your paycheck to a checking account while receiving some of your pay directly to your savings account. In some cases, this may even allow you to qualify for better interest rates with your bank.
Direct Deposit and Automatic Billing
Direct deposit also makes automatic billing easier as there is no longer a worry of overdraft. So long as your employer pays you on the same schedule each month, you will know when you will have funds available and you will be able to set up automatic payments with ease.
Automatic payments will not only provide a more convenient way to pay bills, but many companies, such as car insurance agencies, will provide a discount on your bill for having automatic payments.
While automatic payments can be set up with each individual company, many banking institutions will set up automatic payments for you.
As mentioned previously, not only is setting up direct deposit for the first time easy, but it is done for free. You will never encounter any charges to your paycheck for setting up direct deposit with your employer.
This is due to the fact that you actually save your employer both time and money as direct deposit is a simplified payment method. Additionally, writing paper checks by hand leaves more room for error than processing your payment through direct deposit.
Without direct deposit, your only other option is likely a paper check. As mentioned before, these can contain errors and they can become lost or damaged.
While an employer can provide you with another check if you lose one, this process takes time and you would then be waiting even longer for your pay.
Switching to direct deposit will also reduce your environmental impact as you will be cutting back on both paper and ink. Online and mobile banking have increased in popularity, increasing the accessibility of mobile banking apps and tools.
Most banks will now allow you to review your pay stubs online, includes budgeting tools for savings goals, security protection and more. Online banking also provides you with a digital history that you can easily find, should you ever need to access it.