Direct deposit is a banking option that allows for the transfer of funds without the hassle associated with paper checks. It is very common in the United States. In fact, research that over 145 million Americans transfer funds in this way on a regular basis. Many businesses offer their employees the option of using direct deposit to receive their paychecks. The IRS also allows taxpayers to receive refunds in this way. Social Security, unemployment compensation, and other government benefits may also be available with this option.
There are many advantages to using direct deposit for your banking needs. Funds sent in this way typically are processed faster than paper checks, allowing you quicker access to your money. If you don’t live near your bank or your schedule makes it difficult to run errands during the day, direct deposit is a convenient alternative to traditional banking. If you are trying to become more disciplined about saving money, you can arrange to have your deposit automatically divided between your checking account and savings account. If you’re concerned about the environment, you can rest easy knowing that this method reduces the amount of paper required to process financial transactions.
The process for setting up a direct deposit can vary. Many employers will ask you to fill out a form that explains their payment schedule and gives them permission to access your bank account information in order to deposit your paycheck. A voided check that shows your bank account’s routing number may also be required. If you want to arrange for direct deposit of federal government benefits, however, you’ll need to call a customer service representative from the appropriate agency and provide your banking information over the phone.
Another variation of direct deposit is the direct payment option, sometimes referred to as automatic bill payment, electronic bill payment, automatic debit, or direct debit. This banking method allows you to arrange for the automatic payment of your monthly bills. Direct payments can be used to pay your mortgage, utility bills, credit card, or car loan. Some people even use direct payments to pay for magazine and newspaper subscriptions or charitable donations. If you have a tendency to forget to pay your bills on time, direct payment is a convenient way to manage your finances and prevent missed payments from damaging your credit rating. To arrange for direct payments, you’ll need to contact the companies that issue your monthly bills.