A payment method is important as everybody needs to know their money is safe and accessible right away. Direct deposit offers that and is preferred over traditional payment methods like cash or personal checks as it saves you the hassle of going to the bank to deposit money into your account.
What Is Direct Deposit?
Direct deposit is a payment option where funds are electronically deposited into your bank account. It is a common method for employers to pay their employees as it is a safe and inexpensive option for all involved parties.
TWith direct deposit, people can receive their payments faster and avoid dealing with paper checks and multiple bank visits. Besides payroll, direct deposit is a standard way for people to receive tax refunds, social security, and Veteran’s Assistance benefits.
How Long Does It Take for Direct Deposit Funds to Become Available?
One of the biggest benefits of direct deposit is that funds are generally available the morning of your payday. While in some cases you can withdraw money before your bank’s business hours, in other cases you’ll need to wait for the bank to open.
The deposited funds are available to you right away, and you don’t need to accept the transaction beforehand or wait for a check to clear. You can also set up a certain amount to go into your savings account automatically, which can come in handy.
Sometimes, when checking your bank account online, a “Direct Deposit Pending” message might appear. This message means that your deposited funds are temporarily on hold while your bank is verifying everything. Even though this hold of deposit usually clears quickly, in some special circumstances, it can last up to seven days.
Is Direct Deposit Safer Than Other Payment Methods?
Direct deposit is considered safer than traditional check payments. A physical check travels through many hands before reaching you, so there is a higher chance of identity theft. Also, checks are more likely to get lost or stolen, while there is no such problems with direct deposit.
Cyber threats have become a fear of many people within the last few years. Many are scared their private information and funds can get stolen during cyber attacks, but you don’t need to worry, as banks are working very hard to protect their customers with cybersecurity being one of their top priorities.
How Does Direct Deposit Work?
Setting up direct deposit with your employer is usually done when you first start working, but it can be done at any other time. It is a simple process, but you must provide accurate information to your employer to set direct deposit up correctly.
You will be asked to provide a voided personal check or direct deposit enrollment form to provide necessary information such as your bank’s identification number and your account’s routing number. You may also need other bank information, as well as names of other people listed on your account.
Most companies require you to have a checking or savings account to use direct deposit. You might be able to use a payroll card as an alternative, and you can either ask your employer to provide you with one or order it online.
After providing all the information, setting up an account can take anywhere from a few days to a few weeks. Once everything is set up, your payments will automatically arrive in your bank account.
Advantages of Direct Deposit
There are many reasons why both businesses and consumers like using direct deposit, including:
- There is less hassle with automated payments, as no action is required on your part. Whether you are traveling out of town, or too busy to make it to the bank, your account will be credited anyway.
- Electronic records make it easier to keep track of everything, and you don’t need to write down your payments.
- There is less paperwork, and you don’t have to deal with physical paper checks.
- It is much more efficient, as sometimes direct deposits arrive a few days earlier than paper checks. Plus the funds are available right away, and you don’t need to deposit the check and wait for it to clear.
- It’s generally free to receive payments, and they are quite safe. You don’t have to worry about misplacing, losing, or having your check stolen.