There are many advantages to direct deposit, the key one being that direct deposit gives you control over your money. Direct deposit comes handy as it automatically places your pension, paycheck, social security, or other type of income into your savings, checking, or money market account. Experts recommend it because it will help you stay organized and divide your paycheck among up to four bank accounts. Many studies have shown that people who use direct deposit are able to save more money in the long term, all other conditions being equal. With direct deposit, you feel safe knowing that your money is always there no matter what. You decide how to divide your salary with respect to your accounts, and if this is done automatically, every time you get paid. Never in the history of direct deposit has a payment been lost. Its level of safety and security is comparable to that when companies and governments have to transfer funds, and it may even be safer and more secure. Confidentiality is guaranteed. The number of people handling direct deposit transactions is two at the most, compared to up to nine at banks.
Direct deposit saves you money too. It costs around six dollars to deposit a check according to studies. What is more, direct deposit saves you time – you have to go to the bank to deposit checks otherwise. You do not have to wait for a check to clear, which means you get payment sooner. Direct deposit helps companies save money, eliminates lost and stolen checks, and the US government saves a bundle in taxpayers’ money and renders the national payment system more effective.
What is more, direct deposit can even help prevent financial crimes. Ever since the system was introduced, the dollar losses incurred through attempted check fraud have dropped, while criminal attempts continue to rise.
So how does direct deposit work? Your employer sets it up. To find out if your employer offers direct deposit service, you will have to call the personnel or payroll department. In case the employer does, he or she has the paperwork required to this end. In particular, they will need your Social Security number, your bank’s identification number and the number of your bank account. The bank ID number is the first series of numbers on the bottom left-hand corner of your check. It is followed by your account number and the check number. You will need to provide your employer with a check, duly voided by your bank, for these details. From then on, your salary will be distributed according to the voucher system. The time period it takes to establish direct deposit depends on when you get paid. If you get paid once a month, then the period will be one to two months. If you get paid once a week, then the period will be one to two weeks and so on. With every next paycheck, you will get a voucher showing the amount deposited to your account.
For federal government income, you have to call the toll-free number of the social security administration or visit one of your bank’s branches. You can also call a toll-free number in Spanish, and you will get enrolled over the phone. With most government agencies, you have to first fill out the direct deposit enrollment form.
If you set up automatic payment or direct deposit, reorder checks, or prepay a wire transfer, your bank will require that you provide an ABA number. This number speeds up processing of credit and debit between different financial institutions.
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