Direct deposit provides several benefits to both employees and employers. It is considered to be the most convenient way to receive wages from employment or government benefits, such as Social Security.
In fact, more employers have begun to eliminate the issuance of paper checks and federal benefit programs can now only be issued through prepaid cards or automatic deposits.
You may be required to complete a direct deposit form or sign up for a prepaid debit card. While these prepaid debit cards are a viable way to obtain federal benefits or paychecks, many of these cards include several fees for usage.
Therefore, it is essential to take the time to learn more about these benefits. In the sections below, you will learn how to set up direct deposit for the first time in 5 easy steps as well as learn more about the benefits of automatic payments. In doing so, you will be better prepared to complete your deposit form and can do so without a hassle.
What is Direct Deposit?
Direct deposit is a method of receiving payment or federal benefits. Once enrolled, funds are automatically deposited into your checking or savings account and, thus, eliminate the need for paper checks.
There are several benefits to having direct deposit and many employers and government entities require it. These benefits include:
- Reduced costs to employers and federal agencies.
- A greater convenience for employees and beneficiaries who no longer have to deposit a check at the bank.
- The elimination of lost or stolen checks, thus reducing the potential for fraud or identity theft.
- Potential savings for employees and beneficiaries with financial institutions that waive monthly service fees with automatic deposits.
Government-Backed Direct Deposit
1. Get a Direct Deposit Authorization Form From Your Employer
You will need a direct deposit form from your employer to set up automatic payments for your paychecks. Typically, you can obtain an authorization form from management or from your employer’s Human Resources (HR) department.
If your employer does not have authorization forms but allows automatic deposits, then you may also be able to obtain a form from your bank or financial institution, such as Bank of America or Wells Fargo. If your employer does not allow for automatic payments, then you will not be able to set up automatic deposits.
If you are wondering how to set up direct deposit for Social Security or another federal benefit program, then you must contact that program. Be prepared to provide all of the information that will be covered in the sections below.
2. Input Your Account Information on the Direct Deposit Form
While not every direct deposit authorization form is the same, most forms will require you to provide basic personal information and banking details. If you are using a form from your financial institution, then you will likely need to provide your employer’s mailing address.
Alternately, if you are utilizing a form from your employer, then you may be required to provide your bank’s mailing address. This can typically be found on your bank statement or on the bank’s website.
Regardless of what direct deposit form you are using, you will need to be able to provide:
- Your routing number, which is a 9-digit number that is associated with your bank. This number is known as the American Bankers Association (ABA) number.
- Your account number, which is unique to your checking or savings account.
Your account number can be found in many of the same ways. These numbers can be found by contacting your bank, through an online banking account or on your personal checks.
If you are looking at one of your personal checks, then the bank’s routing number is the first number printed on the bottom left of your check and your account number will be the second number at the bottom left. Your account number always follows the bank’s routing number.
Next, you will need to input the type of account that funds will be deposited into. In most cases, this will be either a checking or a savings account.
Finally, some direct deposit forms may have additional requested information, such as your Social Security Number, mailing address or contact information.
3. Review Your Direct Deposit Amounts
When enrolling in direct deposit, you will have the option of having 100 percent of your funds deposited into a singular account or split between two or more accounts. For example, you can have 90 percent of your pay deposited into your checking account and 10 percent of your pay deposited into your savings account automatically. The amounts deposited into each account will always be based on a percentage of the total amount available for deposit.
4. Provide a Voided Check or Deposit Slip from Your Bank, Where Applicable
If you would like to enroll in direct deposit, then it is essential that you ask your employer whether or not a voided check or deposit slip must be provided. Some employers require one of these items to verify your routing and account numbers.
You can get a deposit slip from your bank. Should you wish to use a voided check, simply write “VOID” across one of your blank checks. Doing so ensures that the check cannot be used if it becomes lost or stolen.
5. Submit Your Direct Deposit Authorization Form
Provide your completed direct deposit form to your employer as soon as possible. If required, then provide your employer with a voided check or a deposit slip from your financial institution as well. The sooner you submit your completed form, the sooner you will begin to receive your paychecks or federal benefits directly to your bank account.
How long does direct deposit take to begin taking effect?
Direct deposit can take up to a few weeks to begin taking effect. After you submit your completed form to your employer, you may still receive one more paper check before your wages begin to deposit into your desired account(s).
Should you ever need to alter your information for automatic deposits, you will likely need to complete a new form with your employer. Once done, it can take up to a few weeks for the changes to take effect.