Even with all of the financial tech available at your fingertips, like online banking and mobile apps, it can still be a drag to deposit a check.
Whether it’s trying to take a clear photo of the front and back to submit to the bank, which will deposit it pending review, or physically bringing it into a branch, these hassles are easily avoided by signing up for direct deposit.
With direct deposit, no paper checks are ever issued. The money is transferred electronically, and you can typically access that money on that same day, and sometimes even before your scheduled payday.
Because the transfer is done digitally, direct deposit tends to be more convenient, less time-consuming, and more secure than using paper checks.
Most employers now offer direct deposit as an option, and, in some states, even require it.
What is a direct deposit?
Direct deposit allows someone to electronically send money from their bank or financial institution directly into someone else’s.
The money is sent via the Automated Clearing House (ACH) network, which transfers money between banks and financial institutions.
ACH transfers eliminate the need to send physical checks or cash. These transfers can also happen almost instantaneously because they’re digital and you don’t need to worry about things like proving that a check is legitimate.
Employers also find direct deposit convenient because they can process payroll much faster without having to deal with issuing, signing, and mailing checks.
Direct deposit is a popular way to get your paycheck, but that isn’t the only use.
You can also use it to get a tax refund, Social Security benefits, unemployment benefits, investment-related dividends, as well as other payments.
How do You Set Up Direct Deposit?
Setting up direct deposit is simple. All you have to do is fill out a direct deposit authorization form.
This usually happens on your first day of work, but you can often choose direct deposit or change your information later on.
Some companies handle this process entirely online and some use a third party to sign you up.
When setting up a direct deposit, especially at a new job, you’ll want to remember to have the following information available to make it as simple as possible:
• Your bank account number(s) and type of account
• Bank routing number
• Bank name and address
• Whether your putting money in a checking or savings account
• How much of your paycheck you want to deposit in the account
• A blank, void personal check
Much of this information can all be found on a personal check, or by contacting your bank or financial institution directly.
Splitting Your Direct Deposit
short-term financial goals, such as paying all your bills on time or saving for an upcoming expense.
If you know when you have access to your paycheck, for example, it’s possible to schedule your other bills or an automatic transfer to savings account soon after the direct deposit is scheduled.
Other advantages of direct deposit include:
• Your bank might waive your account maintenance fee if you receive regular direct deposits.
• It reduces the risk of check fraud or identity theft from a lost or stolen check.
• You can’t lose or misplace the funds.
• Electronic records don’t clutter draws or fill file cabinets.
• You can easily track your paychecks, and make sure none have been missed, since there is an electronic record of each payment in one place.
The Takeaway
Direct deposits occur when an employer, government agency, or other third party instructs its financial institution to digitally deposit funds into your spending or savings account on a specific date.
Direct deposit eliminates the hassle of depositing paper checks and, once the funds are transferred into your bank account, they are available to you.
Direct deposit can make it easier to keep track of your finances, pay bills on time, and avoid negative balances and overdraft fees.
Looking for more ways to simplify your financial life? Consider signing up for a SoFi Money® cash management account.
With SoFi Money, you can earn a competitive interest rate, spend and save–all in one account. And, you can easily add your SoFi Money account as an option for your direct deposit.
Sign up for SoFi Money, then set up direct deposit into your new cash management account.
SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com