How Using Direct Deposit Can Leave More in Your Paycheck
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How Using Direct Deposit Can Leave More in Your Paycheck
Direct deposit involves having the money you earn in your paycheck sent directly to your account at a bank, savings and loan, or credit union by your employer. Instead of giving you a paper check, your employer provides some kind of notification of the amount you were paid and what was withheld, either in paper or electronic form.
Things To Know
- Direct deposit can provide easier, quicker access to your paycheck.
- By using direct deposit, you can make the most of your paycheck.
- Many banks offer benefits to customers using direct deposit.
How direct deposit works
Many employers offer direct deposit. It saves employers money because they don’t have to pay to have paper checks issued, and it is safer for you because there is no risk of having a check lost or stolen before it is deposited into a bank account.
If you use direct deposit instead of getting a paper check, every pay period your employer will electronically transfer the amount of money you are paid directly into your bank account. That money may be available for you to spend the day it is deposited—payday—or the day afterward.
Advantages of direct deposit
Direct deposit offers many advantages that can help you make the most of your paycheck. If you work odd hours or don’t live close to your financial institution, you can save the time and money that it would have taken you to drive to the bank.
If you are sick, off or on vacation on payday, your check will be deposited into your bank account as usual and you won’t have to wait to get the funds until you are back at work. In addition, if you have direct deposit, you will never have to pay a check-cashing fee if you can’t get to the bank and need cash.
There are many other advantages of direct deposit. You can set up automatic transfers from your bank account so that bills are paid on time from the funds that were deposited, transfer money to savings accounts, and make extra payments on debts such as credit cards and car loans.
If you deposit a paper check, the bank may place a hold on those funds, and they may not immediately be available to withdraw or use to cover checks you write or charges on your debit card. In contrast, funds from direct deposit are usually available more quickly, so there is less likelihood that you will bounce a check or a charge you make on your debit card. That can save you money in bounced check fees and the hassle of having to wait until your check clears and funds are available to pay bills or make withdrawals.
Many banks, credit unions, and savings and loans offer small percentage discounts on loan rates to customers who have their paychecks deposited directly. Another benefit may be a free checking account.
One downside is that you will have to change your direct deposit information at your employer if you decide to change banks. You may also need to utilize your debit card and ATM withdrawals more often to turn your direct deposit into cash.
