The term "direct deposit" (hereinafter "DD") refers to electronic payments that are automatically made on a regular basis.
These scheduled payments are used for paying employees as well as dispersing pensions, government benefits, tax refunds, investment payments and more.
These days a lot of people opt for DD when it comes to getting paid by their employers, simply because it allows them to forego having to physically cash a check.
Most people seem to prefer this option because it is far more convenient overall.
DD transfers can also be more reliable and secure than a traditional paper check. Millions of people all across the country take advantage of DD.
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Direct Deposit: How It Works
The whole process that occurs with DD payments is fairly simple and straightforward. You'll need to set up DD with the payer, and you will not have to worry about doing so again.
One of the most common examples of DD is a business paying its employees.
The payer is the employer, and they tell the bank to automatically transfer the money you have earned into your checking account.
When payday rolls around, your bank sends the funds to your bank account, and then your employer's bank takes out the necessary amount to pay the business's employees. If you do not have a bank account right now, you can always opt for a prepaid debit card.
While DD is used primarily for businesses to pay their employees, some payday loan lenders also use direct deposit as a way to disperse funds to those who have been approved.
Setting up Direct Deposit
You will find that setting up DD is very easy and doesn't take much time at all.
If you want to receive your paycheck through DD, you will need to fill out and submit the necessary form to your employer.
Some of the information you will need to include in the DD authorization form include the name of your bank and credit union, the type of account you have (checking or savings), your account number and routing number.
Advantages of Direct Deposit
There are numerous benefits associated with opting for DD, and it's important that you know what they are.
The sheer convenience is one of the main reasons why it is such a popular option. With it, the money you earn from your job will automatically be transferred into your checking account so you won't have to stand in line to cash a check.
The reliability of DD is something else that a lot of people like about it. You can always count on your entire paycheck to be electronically transferred the same day and time each week or however often you get paid.
There is also the matter of security, which is very important. DD is a much more secure option than traditional paper checks.
Numerous studies have concluded that it can reduce identity theft by up to 85%.
The funds that are transferred into your checking account via DD will go in electronically and immediately, so you won't have to worry about waiting to get paid. The speed at which these transfers go through is one of the best things about them.
DDs are incredibly easy to set up, as all you will have to do is simply fill out and submit the appropriate form. You will also find that canceling it is also incredibly simple and doesn't take much effort at all.
It has become commonplace for most banks to waive any monthly account maintenance fees for customers who receive direct deposits on a regular basis. If you want to save yourself some money each month, you might want to think about opting for DD.
Who Should Opt for Direct Deposit?
There are many people who can benefit from DD, including those who get a loan.
If you do not currently have DD set up with your employer, you will definitely want to look into doing so right away.
Anyone who wants to save themselves time and effort when it comes to getting paid will need to fill out and submit a DD authorization form.
There are many different types of payments that can be made via DD, including payroll payments, bonuses and commissions, travel expense reimbursements, pension payments, dividends and interest payments from investments.
Direct Deposit and Credit Unions
If you belong to a credit union instead of a bank, you will be glad to know that you can still take advantage of DD. These days some businesses even have employee credit unions. If this is the case, you might be required to have your check deposited there.
Experiencing Problems with Direct Deposit
While problems with DD are not incredibly common, sometimes there may be an issue. If the transfer didn't go through, chances are it is due to a change in the payroll process or inaccurate information. You will just need to contact the payer and your bank.
If the transfer comes through but for the wrong amount, you will need to check your pay stub against the bank statement. In the event that you were not paid the correct amount by your employer, you will need to contact the payer and bank to remedy the problem.
Sometimes a transfer is made twice, though this is somewhat rare. A payer cannot access or withdraw money from your account, but they do have a five-day window to recall payments that are made in error without notifying you.
A vast majority of DD problems can be solved quickly and easily, so it's important not to panic.
Overall, direct deposit can be a huge convenience and a more secure way to get paid than paper checks.
Always remember to contact both the payer and your bank in the event of a problem like any of the ones that are mentioned above.