When it comes to being paid for your hard work, the faster you can get your money, the better.
However, it can sometimes be a hassle to go to the bank or to use your mobile banking app to cash or deposit a check every time you get paid. If you’re looking for a more convenient way, that’s where a direct deposit comes in.
Direct deposit, which is a free electronic service that sends your paycheck to your bank account or debit card, has many benefits and is quick to set up. Let’s break it down.
What is direct deposit?
When you start a new job, your employer will give you a direct deposit form. You’ll need a few pieces of information to fill out this form, which includes: your bank account number, your routing number, the type of account (typically a checking account), the bank’s name and address, and a voided check.
How to set up direct deposit:
- Fill out your bank routing number
- Fill out your bank account number
- Specify the type of account
- Fill out the bank's name and address
- Include a voided check
Your routing number is nine digits and can be found in the lower-left corner of the front of the check. Your bank account number is just to the right of this, also in the lower-left corner. The type of account will either be your checking or savings account, whichever you prefer.
Some direct deposit slips may also ask for your social security number and home address, so make sure you have that information handy, too. Once the direct deposit form is filled out completely, turn it into your employer.
How does direct deposit work?
One of the great things about direct deposits is that they’re automatic. When you receive funds through a direct deposit, your account balance automatically increases, and you can use this money right away.
You won’t need to accept the payment or deposit funds to your account, which would be a step if you received cash or check.
How long does direct deposit take?
Now that your direct deposit is set up, you may be wondering how long it takes to go into effect.
In most cases, a direct deposit takes one to two pay cycles before you’ll see the amount you’re paid live in your bank account. You may be given a physical check until everything is set up and good to go, depending on your employer.
Once it’s ready, exactly when your funds appear in your account will vary on the business you work for and the type of payroll software used. While some companies pay every two weeks, others pay weekly, or on the 15th and 30th of each month. This is something you’ll want to ask your employer about ahead of time, so you’re not taken by surprise.
Related: If you’re an employer looking to get more information on payroll software, check out this free list, brought to you by G2!
Reasons to use direct deposit
Whether you’re an employer or an employee, there are many benefits to choosing to use direct deposit.
- Automatic deposits: You receive your money without needing to take any action.
- Electronic records: You’ll easily be able to see all of your payment history and everyone will have a record of the payment.
- No mail or paper to wait on: Since these payments are all electronic, there’s no hassle of needing to print a check and mail it out.
- Security: Unlike a physical check, no one can steal it, alter it, or attempt to cash it.
- Cost: As an employee, it’s free to accept direct deposits. As an employer, you won’t have to spend money on envelopes, stamps, or physical checks to pay those who work at your company.
- Faster pay: Direct deposit puts the funds in your bank account fast and you can use them right away.
It’s always best to be direct
Both in life and when it comes to your deposits. Setting up a direct deposit is easy, and in no time you’ll be able to see your payment come through to your bank account. Don’t spend it all in one place!