Are you tired of paying a monthly fee for your bank account? Setting up direct deposit could help you cut banking fees and other expenses. Electronic transfers are quicker and more secure than traditional paper check deposits.
A payroll direct deposit also has other perks, like getting paid no matter where you are on payday. You can also use direct payments to help you save and budget. Learn how signing up for direct deposit could help you increase your wealth and peace of mind.
Setting up direct deposit is the swiftest way to get your hard-earned money. Your bank account receives payments faster, and funds are deposited into your account faster than a paper check, even with mobile banking.
Paper checks are also less convenient, since employees:
- Wait to receive the physical document.
- Must go to their bank or ATM to physically deposit it or use mobile banking apps to make a remote deposit.
- Wait for banks to lift the hold on availability to the fund.
With direct deposit, you can avoid the hassle of going to the bank or using a smartphone app every time you want your payment. It also takes longer to get access to the deposited funds, whether you deposit the check with a bank teller or through an app.
When you deposit a paper check, your bank forwards the information to the paying bank (from where the bank draws the payment). If the account on the paper check does not have enough funds to cover the entire amount, the check will “bounce” (remain unpaid).
Based on that bank’s response, your bank determines when the funds will be available. The waiting period can depend on the financial institutions. Check transactions between two accounts within the same bank are often quicker than those involving separate banks, especially in different countries.
The following are other factors that can delay check deposits:
- The paying bank returns the check unpaid
- You redeposit a previously returned check
- You have a new bank account
- You have frequent overdrafts
An ACH direct deposit, however, does not usually have holds. The paying bank – your employer – deposits the payment directly into your account, without you or your bank taking any action.
In addition to avoiding holds, direct deposit works after banking hours and operates almost instantaneously. Payroll direct deposit transactions, for example, are popular because employers typically have payroll disbursements on automatic. Employees often receive payments shortly after midnight on payday.
Many employers prefer payroll direct deposit because it keeps their accounting current. Workers who wait weeks or months to deposit a paycheck can throw off balances or cause accounting errors.
Many states use electronic transfer for their Unemployment Insurance programs. The California Employment Development Department (EDD), for instance, uses an EDD direct deposit card for in-person and online purchases, cash withdrawal, and transfers to another financial institution.
Beneficiaries can choose a prepaid card with direct deposit or opt to receive direct deposits to their bank. The state deposits the unemployment payment onto the direct deposit card and into private accounts at the same speed. Both direct deposit methods are faster than waiting for paper checks to arrive through the mail.
In addition to getting your paycheck or unemployment benefits faster, electronic transfers reduce the payee’s risk. Continue reading to find out how direct deposits are more secure than other payment types.