If you’re like most working Americans over the age of 25, you’ve probably received a paycheck in the form of – well – an actual check at least once in your lifetime. Kids these days might wonder why we even call them “checks” when we have direct deposit, a much faster and easier way to get paid. Long gone are the days of waiting in line at the bank or fighting the Thursday crowds before a holiday.
It’s no surprise why most people these days choose direct deposit—it’s fast, secure, and reliable. No more worrying about what you’d do if you lost track of your paycheck on the way to cash it in.
But how exactly does it work? And can anyone get paid early with it? Keep reading to learn the ins and outs and find out why everyone should be using it to cash in on their hard-earned bread.
What Is Direct Deposit?
Direct deposit is a way of receiving money directly into your bank account, where magical fairies wave their wands and – cha ching! – make it rain in your bank account. No, not really; that would be awesome.
It actually happens through an exciting thing we like to call electronic transfer. Rather than getting a paper check that you have to cash yourself, the money goes straight into your account automatically through the power of technology.
Today, nearly every single job you apply for offers direct deposit to new employees. But it’s not just your local Target, Shop Rite, or Macy’s stores that are offering this perk. The government also uses it to send things like Social Security benefits, unemployment payments, and tax refunds.
Ever take a look at your bank account (maybe through squinted eyes to see if you have enough for that late-night Taco Bell run) and see “ACH pending?” That stands for the Automated Clearing House (ACH) system, which is a secure network that’s used for processing these transactions.
To sum up, direct deposit saves you the time and hassle of dealing with paper checks and having to waste that precious $5-a-gallon gas to drive to the bank.
Turning the Tide: When Did Direct Deposit Even Start?
Listen up, kiddos. Direct deposit has been around longer than you might think. It actually started during a magical decade known as the ’70s, when the government started looking for better ways to send out payments in larger quantities.
Some of you might be familiar with the term “snail mail,” and paper checks were no different. Plus, they were pretty expensive to mail, which is kind of ridiculous when you think about it… paying money just to send money? Not to mention, they could get lost or stolen.
Then the U.S. Treasury made it their mission to get more people who were receiving federal payments (like federal employees or people getting federal benefits) to switch to this newfangled thing called direct deposit. More and more employers caught on and started implementing the system on their own, especially if it meant more money savings for them.
Fast forward through the early 2000s to today, where online banking and electronic payments are commonplace. In fact, if you were to go out and get hired today, your employer might not even have an option for a paper check during the initiation! You might have to show your age and request a separate form. As the kids call us – Boomers, I’m talking to you.
Diving Deeper Into How it Works
I’ll make this as simple as possible to understand, because the process actually is fairly simple.
- You provide your bank account information—you’ll need to know your routing number and account number—to your employer or whoever is going to be sending you money.
- They enter your banking information into their payroll or payment system.
- On payday, the money is sent through the ACH network, which transfers the funds from their bank to yours.
- The funds show up in your account, usually on the same day or the next business day, depending on your bank’s policies. No fairies needed.
And, voila! Skip the line at the bank and forget about that shaky picture to deposit a check via mobile app. There’s nothing – and I mean literally nothing – you need to do. Just sit back, relax, and watch the cash flow come in.
Finding What You Need
If the steps I listed above just don’t cut it, here’s a more in-depth breakdown of what you’ll need to set up direct deposit. Get those reading glasses out, because here it is:
- Find your bank account number
- Use your bank’s app (if you have one) or locate the account number on your checkbook (if you’re a dinosaur)
- Locate the routing number (same locations as above, grandpa!)
- You might need to provide a canceled check for them to verify the information
- This is so they can make sure the numbers are correct
If you’re setting up direct deposit with a job, you’ll usually fill out a direct deposit form when they onboard you. Your company might also have you work with your HR department to get this done.
If it’s for a kind of government payment, like a tax refund or Social Security benefits, you’ll likely give them the banking info on the specific website. Or you might give it to your ‘tax guy,’ if you have one (for the last 13 years, mine has been my uncle’s cousin twice removed, how about yours?)
Don’t be ‘that guy’ and make a mistake with your numbers. It could cost you a pretty penny – literally. It could delay your paychecks, or even drop your hard-earned cash into the wrong account. And trust me, that person probably won’t be itching to alert the authorities.
What Are the Benefits of Direct Deposit?
Read this far and STILL need convincing? Sigh. Alright, here it is:
- Quick. Like, lightning fast. In fact, some direct deposits actually give you your money up to 3 days BEFORE payday.
- Easy. Need I say more? We’re talking about getting paid in your sleep. At the movies. On the couch. At the gym. Alright, who are we kidding, on the couch.
- Safe. If you’re someone who would misplace their head if it weren’t attached, then direct deposit is for you. Less of a risk of losing your paycheck.
- Dependable. You get paid on time, every time, without having to move a muscle. That means getting paid even if you’re out sick, away on vacation, or working from home.
And it could even make managing your money much easier without all the fuss of worrying about paper checks.
Potential Drawbacks to Know About
Let’s not pretend that it’s perfect. I mean, nothing in life is truly error-free, right? There are a few potential downsides that you should know about before signing up:
- It only works if you have a bank account. This can be hard for certain people, especially those who have restricted access to the internet or don’t live near a bank.
- There’s always room for human error. We’re not perfect. If you or someone else enters even just one digit incorrectly, it could mean delaying your money or even sending it to the wrong person.
- Risk to your privacy. There’s never a 100% guarantee of privacy and safety when it comes to sharing information that is considered to be sensitive.
Even so, for most people, the benefits of direct deposit far outweigh these potential risks.
By Admin –