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October 14, 2022 Personal Finance

Advantages of Using Direct Deposit

There are many advantages to using direct deposit. Before we dive into what those are, lets talk about the basics of direct deposit. Direct deposit is a free electronic transfer service that sends your paycheck or benefits checks directly to the bank account of your choice. This makes it easier for you to get your paycheck and gives you access to benefits like early direct deposit.

To set it up, you fill out a form given to you from your employer that asks for your: account number, routing number, your banks address, your employers address, and what type of account you want your money deposited into.

Now, lets look into a few advantages that come from setting up a direct deposit.

Convenience

Once you’ve set up a direct deposit, the transfer takes place automatically, with no further action required on your part. This means that whether you’re on vacation in the Bahamas or stuck in bed with a cold, you can expect your money to come through directly to your account without ever having to set foot in a bank.

Direct deposit also seamlessly integrates with online banking, making it easy to transfer money, set up automatic bill payments, and view your account history. Plus, you can do it all from your desktop or your mobile app.

Security

According to Javelin Strategy & Research, an independent strategy and research consultancy, almost 85% of identity theft starts with offline transactions—in other words, with a lost or stolen check or billing statement. Direct deposit eliminates the possibility of losing or having a check stolen and therefore reduces the risk of identity theft and fraud.

Reliability

Direct deposit takes place electronically, thereby avoiding third party delays from couriers and eliminating the risk of having checks lost in the mail.

Easy Money Management

Because you set up a direct deposit, you develop a routine for your money management. You know when your money is coming, making budgeting and financial planning much easier to achieve.

Speed

Funds transferred to your account by direct deposit are available immediately. This is not always the case with paper checks as banks may put your funds on hold to account for the time it takes for checks to clear. In addition, because direct deposits are simpler to process than paper checks, they can speed up payments like tax refunds that otherwise might take days or weeks to generate.

Flexibility

Direct deposits are easy to set up and easy to change or cancel. All you have to do is submit a new direct deposit authorization form and/or written confirmation of your request to the payer.

Environmentally Friendly

Going paperless doesn’t mean just saving the trees used to make the checks, you’re also saving fuel and cutting the emission of harmful greenhouse gases into the environment.

PayItGreen, a collaborative initiative led by NACHA, the Electronic Payments Association, claims that the use of paper checks consumes over 674 million gallons of fuel and emits more than 3.6 million tons of greenhouse gases every year.