What is direct deposit and how does it work?
Direct deposit is a way to receive payments owed to you by having the money directly deposited into your checking or savings account.
Setting up a direct deposit means you won’t receive a paper check for that payment. Direct deposit saves time because you won’t have to make a trip to your credit union or bank to deposit the funds. Using direct deposit means the funds are electronically deposited by the payer into the account(s) you specify.
To start setting up direct deposit you’ll need to open a checking account or savings account at a credit union, bank or other financial institution.
At Credit Union of Southern California (CU SoCal), we make opening a checking account easy!
Call 866.287.6225 today to schedule a no-obligation consultation and learn about our mortgages, home equity lines of credit, auto loans, personal loans, checking and savings accounts, and other banking products. As a full-service financial institution, we look forward to helping you with all your banking needs.
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Uses of direct deposit
Here are some of the most common uses of direct deposit:
Payroll. Employers of all kinds offer employees a direct deposit of their payroll. Employees may choose an amount or percentage to direct deposit into one or more of their bank accounts.
Social Security benefits. The Social Security Administration makes it easy to receive your benefit by direct deposit. Direct deposit setup can be done at your bank or credit union, or you can call Social Security for assistance. Your benefit will go automatically into your account every month.
Child support. Typically, court-mandated child support can be received by signing up for direct deposit through your state.
Tax refunds. The Internal Revenue Service (IRS) lets taxpayers use direct deposit to deposit your tax refund into one, two, or even three accounts. Even if you don't have a checking account, there are other options available for direct deposit. Direct deposit is now also available for returns filed after their due date. You can choose direct deposit setup by informing your tax preparer or selecting that refund option when you prepare your own taxes.
Advantages of direct deposit
Saves money. You save money on gasoline and the payer saves money on check printing and mailing costs.
Faster transactions. Your money is automatically deposited, saving you a trip to the bank.
Get paid sooner. Funds are available in your account immediately (unlike with depositing a traditional check meaning the funds need time to clear).
Safer than receiving a paper check. Paper checks can get misplaced in your home, lost in the mail, or lost on your way to the bank.
Disadvantages of direct deposit
Security risks. All electronic financial transactions these days have some level of cyber security risk, which all financial institutions take measures to prevent.
More paperwork when changing banks. If you change to a different credit union or bank, you’ll need to give the payer instructions to stop your direct deposit. If you want to continue direct depositing at a new financial institution, you’ll need to submit a new application form with your new account and routing number.
How to set up direct deposit
Direct deposit setup is easy! You’ll need your personal and banking information for direct deposit.
- Fill out the direct deposit form. The payer will ask you to complete a direct deposit form either on paper or online. Be prepared to provide your name, address, and Social Security number.
- Include your bank information. You will need to provide the account number of the account where you want the money deposited. You will also be asked to provide the routing number for your credit union or bank where the account is held.
- Deposit amount. The amount you choose to direct deposit may depend on the amount you’re receiving and the frequency of the payment. One-time payments (such as a tax refund from the U.S. government) are typically best deposited entirely into the account of your choice. Some people split the earnings from their employment so that some of the money is directly deposited into checking and some is directly deposited into savings or a 401(k)-retirement account. You can specify this amount in a percentage or dollar amount.
- Provide voided check or deposit slip. For added confidence in the direct deposit setup you may be asked to provide a voided check from your checking account into which the money will be deposited, or a deposit slip showing your credit union or bank account routing number.
- Submit the form. Credit unions and banks provide consumers with in-person and online form submission options, but providing the form in person provides added security and assurance. Your employer will let you know how they need the information.
Is direct deposit worth it?
Yes. Having payments directly deposited into your accounts saves time driving to credit union or bank, saves gas, provides faster access to your money, and eliminates the risk of misplacing your checks along the way.
Is direct deposit safe?
Yes, direct deposit is very secure. All funds that are directly deposited into a bank account are electronically transferred.
Why savvy consumers choose CU SoCal
For over 60 years CU SoCal has been providing financial services, including mortgages, Home Equity Loans, HELOCs, car loans, personal loans, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
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Please give us a call today at 866.287.6225 today to schedule a no-obligation loan consultation with a CU SoCal Member Services specialist.