A direct deposit is a fund that is electronically deposited to your bank account rather than through a paper check. The most common use for a direct deposit is for income tax refunds or paychecks.
Direct deposits are a popular way of making payments, because it removes the risks involving loss of checks or the need to visit the financial institution physically to make a deposit.
Direct deposit ensures that your pay is made available in your account almost immediately, even at midnight before the payday in some cases. Another benefit is that the deposit made does not have to undergo a check clearing wait period. As opposed to direct deposit, paper checks can take almost a week to get deposited into an account.
Direct Deposit Benefits for Employers
Direct deposit is an important benefit provided to the employees. It can be used as an excellent financial planning tool, since it allows people to receive their payment in different accounts as they wish. By doing so, saving and investing adds up. Most peopele receive their paychecks via direct deposit and for most it is a preferred method.
Direct Deposit Benefits for Everyone
In addition, direct deposit helps the government, companies, and even individuals to save a lot of money. For patrons, the direct and indirect cost of depositing a check is usually more than using direct deposit once you factor in time, postage, and driving to the bank or credit union.
Consumers can benefit from direct deposit immensely as it is secure, convenient and fast. You can’t lose a direct deposit payment, and it also allows people to access their money with ease at any time vs. a traditional check. Other than getting paid, direct deposit also helps a person in expense reimbursement, travel advances, and any other forms of payments.
People forget that direct deposit can be a powerful tool for saving money. Following are three ways you can use direct deposit to help you save:
- Fees: If you use direct deposit to have your salary delivered, then the monthly checking account maintenance fee is usually waived by several financial institutions.
- Perks: Making use of direct deposit allows you to access many perks. These can include a lower interest rate on the checking account or fee waivers.
- Automatic Savings: You can have a part of your direct deposit sent to a savings account instead of your checking account. This makes it instinctive to automatically make a tax payment or put money into a fund for your retirement. You might not even miss the money, since it disappears before you can even comprehend it.
Automating Your Savings
The trick to automating your saving is to divide your direct deposit into different accounts. There are several direct deposit programs that will allow you to split your deposit in four ways. This will allow you to automate your savings, and helps you to spend only the specific amount you want on each account.
For instance, you can set up a direct deposit that pays a certain amount to your savings, a certain amount to an account to pay your debts, and the rest of the payment to your checking account for your day to day expenses. You can split the direct deposit according to your needs
Making use of an automated savings account deposit can help you build up your savings. You can easily direct your salary to your high-yielding savings account each time you are paid. The savings will gradually accumulate.
Direct deposit is a way through which you can have your pay or money transferred to your account electronically. Direct deposit allows you to have better control over your finances. You can easily decide how much money you want to divide among your accounts and build up your savings. This allows you to pay yourself first, and makes it easy to sort out your finances every time you deposit your paycheck.