Direct Deposit is an Automated Clearing House (ACH) transaction that is a safe, proven, confidential method of receiving a payment. With Direct Deposit, money is electronically transferred into a checking or savings account.

Q: Is Direct Deposit for everyone?

Direct Deposit is an important employee benefit. Direct Deposit can be an excellent financial planning tool because it allows people to divide their pay into as many different accounts as they wish. Saving or investing automatically this way adds up.

Q: How many people use Direct Deposit?

Nearly 65 percent of workers receive one or more payment via Direct Deposit. Research conducted by the Federal Reserve in 1998 found that 97 percent of consumers using Direct Deposit are very satisfied.

Q: Why don’t more people use Direct Deposit if it has been around for so long?

Some employers do not offer it and some employees who may not understand the societal benefits of Direct Deposit just like paper checks. Usage will increase when people understand how much Direct Deposit can eliminate fraud and abuse and save the government, companies and consumers millions of dollars a year.

Q: Are checks safe?

According to a study by Tinucci & Associates for NACHA, "While the banking system itself is secure, the sheer number of times a check must be passed from hand to hand while it is being processed means there is less security available."

In short, checks are usually safe, but Direct Deposit is safest. For banks, check fraud is a $4.3 billion annual problem. Direct Deposit can eliminate these problems. It is the most private, safe, proven way to transfer money.

Q: What is the relative cost of Direct Deposit versus checks?

Direct Deposit saves the government, companies, the country and individuals an enormous amount of money.

For consumers, total direct and indirect costs of depositing a check instead of using Direct Deposit is $5.88, according to the study Tinucci & Associates. Small companies with 2,500 employees can save $1,200 a month by using Direct Deposit instead of paper checks. Large companies of 30,000 employees can save $16,200 a month with Direct Deposit.

The 8.9 billion ACH transactions in 2002 saved the United States over $14 billion using the Federal Reserve’s estimate that society saves about $1.62 per ACH transaction vs. checks.

The government spends an average of 51 cents more to process a check than an electronic transfer.

Q: Why is Direct Deposit good for consumers?

Direct Deposit is secure, convenient and fast. A Direct Deposit payment has never been lost, it saves consumers from waiting in lines at the bank, and gives many people access to their money earlier than a traditional check.

Q: Is Direct Deposit governed by any laws?

The Federal Reserve Banks’ "Regulation E" and NACHA’s operating rules regulate Direct Deposit. Additional rules pertain to government payments.

Q: Can employers require employees to use Direct Deposit?

Many states allow companies to mandate Direct Deposit. However Direct Deposit is so beneficial that most employees want to use it voluntarily. Check your state’s labor codes for details.

Q: Won’t I lose the float from my pay period?

The savings you will realize from using Direct Deposit far outweigh any money earned from check float.

Q: How do I sign up for Direct Deposit?

Your human resources or payroll department can give you the authorization form. If Direct Deposit is not available, ask your human resources officer to consider offering it. Your financial institution should also have information for you.

Q: How do I know when my payment has been deposited?

Most employers continue to issue a pay stub with Direct Deposit. It will show how much was deposited in your account and how much was taken out for taxes, insurance and other items. Your bank can tell you exactly when the money is available in your account.

Q: Why should I help save my employer money?

Direct Deposit saves money for employees, companies, the government and society. Most employees are aware that a stable and healthy company provides a reasonable measure of job security, as well as benefits community and country.

Q: Can I divide my pay among different accounts if I use Direct Deposit?

Yes, you can deposit your pay into as many accounts as you choose. This method helps many people save money by automatically depositing a portion of their pay into a savings or brokerage account.

Q: What else is Direct Deposit used for besides pay?

Direct Deposit can be used for expense reimbursement, travel advances and any other form of payment.

Q: How often will I have a problem with Direct Deposit?

Problems with Direct Deposit are rare. In fact, you are 10 times more likely to have a problem with a check. As the Tinucci & Associates study says, Direct Deposits really cannot be lost.

Q: When do I have access to the money?

Your payment is available to you at opening of business the morning of payday. Your financial institution can tell you exactly when your money will be available.

Q: What happens if I change banks?

Just fill out a new authorization form and provide your written permission to switch accounts.