Direct deposit allows your employer to deposit your paycheck directly into your bank account, eliminating the need to deposit paper checks each payday. The popularity of direct pay has largely made paper paychecks a thing of the past, as 94% of respondents to a 2020 American Payroll Association survey said they were paid by direct pay.
The main benefit of direct deposit may be convenience, but many banks offer additional benefits to customers who get paid this way that can help you save money and even get paid faster.
What is direct deposit?
Direct deposit allows your employer to make deposits directly into your bank account instead of giving you a paper check deposit. So you can use your funds faster and easier.
This is how direct deposit works
When you deposit a check into your account, your bank will contact the bank that issued the check to confirm transaction details, including the amount of the check and whether there are sufficient funds in the payer’s account to pay. This may take some time and you may not have access to funds during this time.
With direct deposit, your employer electronically sends your paycheck to your bank before your upcoming payday, and your bank will transfer the money to your account on the scheduled date. As soon as payday arrives, your salary will appear in your account and you can use it immediately.
Many employers allow you to split direct deposit into multiple accounts, allowing you to set up an automatic savings plan. For example, you can tell your employer to put $50 of each paycheck into your savings account and the rest into your checking account. This can help you increase your savings account balance without having to manually transfer funds.
How to Set Up Direct Deposit
Setting up direct deposit varies by employer, but your human resources or payroll department should be able to help you get started.
To set up direct deposit, you need to know the following:
- Your bank account number and sorting code. Sort codes tell your employer which bank to send your money to, and account numbers help ensure that funds go to the correct account at the bank.
Most banks list your account and routing number on their online banking portal. You can also see these numbers on the checks that come with your checking account.
The sort code is the nine-digit number in the lower left corner of the check and your account number on the right. After that is the check number, which usually tells you how many checks were written from your checking account.
Some employers will ask to cancel checks when you set up direct deposit to verify your account information. This means it’s a good idea to bring your checkbook with you when setting up direct deposit in person. To void a check, simply write “VOID” in uppercase or lowercase multiple times in important fields, such as: B. Amount paid column, Amount paid column, Payee column, Date column, Signature column. You can also write “VOID” on the back if you prefer.
Your bank’s offer for direct deposit
Banks can offer various offers to customers who set up direct deposit in their checking accounts.
One of the most common benefits is the waiver of maintenance fees. Some banks charge a monthly fee for checking accounts, but they may waive the fee if you have sufficient funds or receive recurring direct deposits.
Some banks offer higher interest rates on checking accounts or linked savings accounts if you meet certain requirements, which may include a minimum number of debit card transactions or receiving direct deposit.
Some banks and challenger banks even let you get paid early, such as Capital One, Chime, Current, Fifth Third Bank, and Varo Bank, to name a few. Since employers typically send employees’ salaries to banks for processing a few days before payday, those banks can release funds after the transaction is complete, rather than making you wait until payday.
底线
Setting up direct deposit is often easy and saves you time collecting and depositing checks at the bank each payday. Direct deposit is not only fast and convenient, but also benefits from your bank, such as: B. Advance deposit, installment deposit and no monthly maintenance fee.
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