If you want to avoid cumbersome paper paychecks and ensure you get paid quickly, enrolling in direct deposit is a no-brainer. Direct deposit is an electronic payment from one bank account to another and is usually safer and faster than getting a paper check or cash. Due to its benefits and convenience, many users are choosing direct deposit as a safe and inexpensive way to electronically transfer funds to a bank account or card. Most organizations now even prefer or require you to use it, so learning how to set up a direct deposit can be valuable when starting a new job or opening a bank account.
Fortunately, whether you sign up for direct deposit through your employer or financial institution, the process is similar. To get started on the right foot, follow these steps to learn the benefits of direct deposit, how it works, and ultimately how to set up direct deposit on your own.
1. Get a Direct Deposit Authorization Form
Having your paycheck directly deposited into your bank account is a fairly quick and easy process. When it comes to learning how to set up direct deposit, begin by asking for an online or printed direct deposit authorization form from your employer. A direct deposit authorization form is a document that authorizes a third party, usually an employer for payroll, to send money to a bank account. If one isn’t available or you are transferring funds between two consumer’s bank accounts you can also ask your bank or credit union for one.
2. Fill In Account Information
In order to authorize payments, bank account information is needed to validate set-up and ensure security. You will typically need to provide personal bank account information. Fortunately, most of this information can be found on a personal check.
Here’s what you need to set up direct deposit:
- Bank’s mailing address: You can find this located on your bank statement or on your bank or credit union’s website. If you are using your bank’s direct deposit form, you’ll most likely need your employer’s address or the bank address of the individual you are conducting transfers with.
- Bank’s routing number: This is the nine-digit number located on your bank statement or along the bottom left of your checks.
- Your account number: This is located after your routing number on the bottom of your check. You can also find it on your deposit slip or bank statement.
- Type of account: Identify where you want your direct deposit to go and distinguish if it is a checking or savings account. Some organizations allow multiple accounts to be used in direct deposit.
- Social Security Number: Some forms will also ask for your Social Security number to set up your taxable account with the IRS.
- Your name, home address, and email address: Employers may need additional personal information like your home and email address to send confirmation notices digitally or in the mail.
If you do not know where to locate any of this information, call centers are available for most banks via their telephone number. They will be able to assist you in getting any information you need to successfully fill out the form.
3. Confirm the Deposit Amount and Where It Will Be Sent
Decide whether you’d prefer to deposit the entire paycheck amount or spread the amount across multiple accounts. Commonly, direct deposit recipients prefer the entirety of their payments goes into their checking account, however you can choose to split the funds into separate accounts. Some opt to put 20-30% of their paychecks into a savings account to contribute to their emergency or vacation fund. Some banks will even allow recipients to direct deposit into more than two accounts. However, budgeting can help you make decisions on how much to save, spend and invest.
4. If Required, Attach a Voided Check or Deposit Slip
Some organizations require a voided check or deposit slip to verify the account number or routing number prior to depositing funds. Another option is to scan a copy of your check and send it online. Be sure to write “Void” across the face of the blank check before sending it to ensure no one can use it to withdraw money from your account. Then attach the check or slip to the direct deposit authorization form.
5. Submit the Form
Give the form to the organization that will be depositing your funds. Regarding how long direct deposit takes, in some cases, it can take one to two pay cycles for direct deposit to go into effect. Once direct deposit is ready, you can track when automatic transfers take place to schedule any bill payments that will take place after your payment hits. Monitor if any bills pull from your account prior to direct deposit transferring your funds to avoid pesky over drafting fees.
How Does Direct Deposit Work?
Direct deposit is an electronic payment from one bank account to another, meaning money moves from an organization’s bank to an employee’s bank account. To make these transfers, direct deposit uses a system called the Automated Clearing House Network which coordinates these payments with financial institutions. Direct deposit uses automatic transactions meaning when you receive or send funds it automatically increases or decreases as the payment arrives or transfers.
Who uses direct deposit? The better question is: who doesn’t? Safety and efficiency have led institutions, governments, businesses, employers and even consumers to turn to this method of payment to manage payroll and transferring funds. For example, the Internal Revenue Service and the U.S. Social Security Administration send tax refunds and Social Security checks directly to taxpayers and retirees via direct deposit. Businesses will even send payments to vendors via direct deposit to limit issues with mail checks and time sensitivity.
If you are wondering if you can set up direct deposit from one bank to another you’ll be pleased to know consumers can use the same technology as these large institutions. You can set up direct deposit to handle bill payments and avoid using checks or receiving extra postage costs and hassle. Set-up an online bill payment or ACH payment with whoever you need to pay.
The Benefits of Setting Up Direct Deposit
There are many benefits to enrolling in direct deposit, however, one of the biggest is that it makes all paychecks paperless, which increases safety and lowers costs. No more running to the mailbox, being in town to pick up a check or working around office or bank hours. No one can steal or alter your paycheck and funds seamlessly move from one account to another. Users have a record of all payments, so tracking your account transaction history is a breeze. Generally, if you receive your payments through direct deposit, your funds will be available to withdraw at least as soon as if you had deposited a paper check.
Direct deposit may also allow you to avoid monthly maintenance fees on a checking account without maintaining a minimum monthly balance. Another perk is that direct deposit programs often enable employees to designate a portion of deposited funds for savings so you can save automatically with each paycheck.
Add some ease and peace of mind to your life by learning how to set up a direct deposit and enrolling today! Banks and credit unions go to great lengths to ensure your payments arrive safely and on time so you won’t lose sleep over making the switch. Feeling money motivated? Try convenient budgeting and pay stubs tracking by using our daily budget manager to get spending smart today!
The post How to Set Up Direct Deposit in 5 Steps | Benefits & How It Works appeared first on MintLife Blog.