How to set up direct deposit
When money is tight, and you’ve got bills to pay, every day to payday matters. How would you like to access your salary deposit in a bank up to two days earlier than usual? Well, this could be possible with the direct deposit feature of your bank account.
If you’re currently suffering the inconvenience of trudging around town to deposit your paychecks, then you could find switching to direct deposit makes your life much easier.
Read on for step-by-step directions on how to set-up direct deposit, including obtaining, completing, and submitting forms. You’ll also learn direct deposit definitions and how this payment method improves access to your money. It’s a most helpful tool in managing your cash flow and spending. And let’s face it, most of us can use a bit of help get all those financial ducks in a row.
What is a good direct deposit definition?
What does it mean to make a direct deposit in a bank account? The simple direct deposit definition is—a way of automatically arranging the regular electronic transfer of your salary directly from your employer’s payroll to your bank account. As a result, there’s no more having to physically visit a bank branch to deposit your check and wait for clearance before accessing your hard-earned money.
However, direct deposit is used for more than just payroll transfers to banks. As an example, retirees can choose direct deposit or Direct Express debit card to receive their Social Security payments. So, it may be a good move to arrange this service now. When retirement comes rolling around, you’ll be ready to go.
The IRS can also use the direct deposit method for irregular payments to you, such as your IRS refunds. Aah, if only there were more of those.
Electronic funds transfer
In the U.S., there is another slant on direct deposit meaning: funds received through the Automated Clearing House (ACH). While the name ACH may not mean much to you, it’s the system behind electronic payment transfers in this nation. Electronic Funds Transfer (EFT) is a more efficient and less costly way for the government and private companies to get your money to you. It beats churning out millions of paper checks each year. Add the cost of postage, and you can see why EFT is the way to go.
Get the benefit of quick access to your funds
Changes made to ACH processes in 2021 have made the same-day settlement of direct deposits the norm. And that’s great news for you, as it can mean immediate access to your funds. But this does depend on which financial institution you bank with.
Some financial institutions give you same-day ACH payments, while others may take up to three business days to make funds available. In some cases, you can get immediate access but may be charged a fee for the privilege of accessing your own money. Others provide you access straightaway and without any charges. That’s the type of bank account you need.
It’s worth shopping around for a bank account that gives you low or no-fee access to your salary deposits as soon as they arrive in your account. Varo Bank is one such bank, with ACH payments made available straight away to customers.
Okay, so how do I organize my wage transfer to direct deposit in a bank?
Unfortunately, setting up direct deposit for your salary is a bit more complex than ticking a ‘yes please’ box on a bank account page. So, here are the general steps for the direct deposit process. It may seem a bit tedious, but seriously, it shouldn’t take you too long.
There are seven steps:
Find out from your employer’s payroll area what forms and details they require
Get the correct direct deposit form
Enter your bank details into the form
Enter your account information details
Decide the percentage of salary you want to be deposited
Attach either a voided check or a deposit slip from your bank
Hand over the form to your payroll section.
If you’re setting up a direct debit for the first time, then here’s a more detailed description of each step in the process.
1. Talk to payroll
Firstly, you should chat with your employer’s payroll area in HR and get the ball rolling from there. Different employers have their own processes and forms, so it pays to start out with the correct details. Payroll staff will no doubt give you an authorization form to complete. The form permits them to transfer your wages electronically every payday to deposit in a bank of your choice.
Payroll may want you to complete the company’s direct debit form, or they may happily accept one already pre-filled by your bank. If you hate filling out forms, this could save unnecessary paperwork.
2. Get the right direct deposit form
If you don’t have to use your employer’s direct debit form, head to your bank’s website and start downloading. Most banks will have any document you need available to download. Some will also have an automated process to pre-fill, print, and send to your payroll section.
3. Enter required bank details
This is pretty straightforward. Just log onto your bank’s website first to easily access the information. Provide the bank’s name and mailing address, and the routing number. The routing number is a nine-digit identification code. Each US bank and financial institution has a routing number assigned to them. Besides being listed on the bank’s website, you’ll also find the code on statements and printed on your paper checks.
4. Fill in your account details
This is another short section to fill out. You’re racing through the direct deposit form now.
Enter your account name exactly as shown against the bank account. So, if you entered a middle initial or middle name, ensure this goes into the form as well.
Fill in the account type, e.g., savings or checking.
Enter your account number. It’s listed in your account details section. You can also find it on your paper checks.
Some payroll forms may require a little more information from you, including your physical address and Social Security information.
5. Decide the amount to deposit in a bank account
You can choose what percentage of your pay you want deposited into your account. If you only have one account, then this will be 100%. However, if you have more than one account, you may want to split your pay across these accounts. It’s a handy way to set some savings aside. You’ve been meaning to save more, haven’t you—you just never got around to it.
6. Attach a voided check or deposit slip
Attaching a physical paper check or deposit slip may be an optional step. It depends on what verification your payroll section needs. It’s a double-check that you’ve submitted the correct routing number and account number. As these numbers ensure your money transfers to the right bank and account, it’s good that payroll acts as a second pair of eyes.
Not familiar with what a voided check is? It’s simple. Just get a blank paper check, and write ‘VOID’ in large letters across it. This ensures nobody can take your check and misuse it. It's also the easiest thing you'll ever do in banking, so enjoy writing out those big, bold letters.
7. Submit the form
Double-check that you’ve completed the entire form and all information is correct. Then, attach the voided check or deposit slip, and send the direct deposit form to payroll. That’s it. Now cross your fingers that they will process the form quickly.
How long before my pay is automatically transferred?
It may take a while for the direct deposit process to start. It depends on payroll staff and bank processes and is now out of your control. So, it could take a couple of paydays before you finally see your money appearing in your account. In the meanwhile, you should still be receiving wage checks. If your wage is still not deposited after two pay cycles, contact HR, just in case your paperwork has been mislaid or held up.
Are you getting access to early direct deposits?
At last, you’re getting automatic funds transfer of your salary, but are you also getting the benefit of early access? Payroll departments send batches of funds transfers to banks before the actual payday, making sure you’re paid on time. Since ACH now does same-day settlement of electronic funds transfer, this means banks often have your wages available up to two days before the due date.
If you’re asking, "How to get my direct deposit early?", the answer is simple. Just get an account with a financial institution that makes your money available the same day it’s received by them. Some banks choose to hold on to your money until the actual payday, while others will happily make your money available immediately.
The benefit of early deposits
If you’re like so many of us (juggling mortgages, the kids’ school expenses, and the rising cost-of-living in general), then early money can be more exciting than a touchdown two seconds into overtime. Unfortunately, even the best money managers amongst us can find themselves squeezed before the next payday. It only takes an emergency, an unplanned medical expense, or a change in the economy for funds to dwindle rapidly.
If you find yourself delaying a bill payment or scrimping on daily living expenses, then having access to your money two days early can take some pressure off.
Don’t reckon you need direct deposit?
Well, maybe you don’t feel you need to use direct deposit with your bank. But consider this: direct deposit can help you manage your cash flow, which is vitally important. The last thing you want is to overdraw your account and start racking up fees. And you also don’t want to delay paying bills and end up with the dreaded ‘Final Notice’ and potential late payment fees.
Another benefit of direct deposit is that you never suffer the inconvenience of misplacing or having paper checks stolen. While they can be replaced, it’s a real hassle and delays access to your much-needed moolah.
Got a side hustle?
While direct deposit helps you manage your personal cash flow, it’s just as important if you’re running a part-time business. Or, for that matter, transitioning into working full-time for yourself instead of for an employer. You can get your clients to pay you by direct deposit–it will make tracking and managing payments owing to you so much easier.
Using a bank app on your mobile phone will also save you time, letting you see at a glance how you’re tracking planned spending and income.
Get the best of direct deposit features with Varo Money
Managing your finances by tracking your spending and knowing when your salary is available is made as easy as, with Varo Bank.
You can access pre-filled direct deposit forms on our app. And we don’t like to hold on to your money. We release your funds on the same day ACH clears them¹.
With a Varo Bank Account, getting early access to your paycheck is a given. And if you’re hoping your IRS refund is available to spend as soon as possible, we’ll make that happen as well. High fives all around!
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