Once you’ve decided to have your paycheck directly deposited, there’s another choice you have to make—where will you deposit your paycheck? Should you deposit it in a checking account, a savings account, or is there another account that’s an even better choice?
A Checking Account is Best
Fortunately, the choice is not hard. For almost everyone, a checking account is the best place to direct deposit your paycheck. The biggest reason for this is that some savings accounts limit the number of transfers and withdrawals in a month, so once you deposit money in a savings account you’ll only be able to withdraw from it so many times.
When you deposit your paycheck in a checking account, though, you can transfer money from that account to your savings account, as well as use that money to pay your bills and loans, put some of it in an IRA and of course spend it on needs and wants.
If your checking account requires you to pay a fee if you go below a minimum balance, you’ll also want to remember to keep some money in a checking account. If your financial institution does charge that kind of fee, though, you should know that plenty of other financial institutions offer checking accounts that don’t have maintenance fees or minimum balances you need to maintain.
The Benefits of Depositing Your Paycheck in a Savings Account
That being said, depositing your paycheck in a savings account can sometimes be advantageous. The biggest situation in which it can be advantageous is if you’re having trouble saving money.
If you don’t like to take money out of your checking account and put it into your savings account because you worry you might need that money for other things, you can get around that fear by having your paycheck deposited into your savings account first, then transferring it to your checking account, minus the amount you’re putting towards your savings. When you use this method, you’re not taking away money from your checking account to add to your savings, you’re transferring money from your savings to your checking account.
Transferring money from your savings account to your checking account also makes you more likely to stick to your budget if you only transfer over the amounts you’ve set aside for each category. For instance, if you set aside $75 for groceries and $40 for clothing, you’ll be less likely to overspend in either category if you only have $ 115 in your account than if you had $150 or $165.
Why not Both?
Of course, instead of trying to decide whether you should deposit your paycheck in a checking account or a savings account, you can always split up your paycheck and have some of it deposited into a savings account and the rest into a checking account. Many employers allow you to split your direct deposit, and if they do you should take advantage of it. You can direct a portion of your paycheck to go into your savings account automatically, then put the rest in your checking account.
In fact, if you really want to get creative, you might even want to see if you can use direct deposit to split your paycheck among multiple accounts. You can have a certain amount put in a savings account, another amount put in an account you’ve set up specifically to pay bills, and deposit the rest in your checking account, for instance. This can especially help if you’re using an online bill payment system to automate your payments.
Direct Deposit Your Paycheck at First Alliance Credit Union
Choosing the right account in which to deposit your paycheck can give you a big financial advantage. While a checking account is usually the best option, some people might want to have their paycheck deposited in their savings account to help them save. If you can split your paycheck between accounts, though, it can help make saving and bill paying a lot easier.
If you want to get the most out of each paycheck, become a member of First Alliance Credit Union and have your paycheck directly deposited into your account. You can use our online banking platform to split your direct deposit between your savings and checking account, save money in our traditional savings account, and use our online banking's Bill Pay center to make sure your bills are always paid on time.