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Direct deposit is a free service that allows you to receive your paycheck via electronic transfer rather than paper check. Many employers offer it because it saves them from having to print out and mail checks. Employees benefit too, since it saves them from having to deposit physical paychecks into the bank after every pay period. Direct deposit reduces the risk of checks getting lost, stolen, or altered. Also, some banks will waive monthly fees and/or offer early access to your paycheck if you sign up for recurring direct deposit into your account.If your employer (or another payer) offers you the option of direct deposit and you want to sign up, read on. Here’s the lowdown on how to set up direct deposit without a hitch.
Information Required to Set Up Direct Deposit
While direct deposit is most commonly associated with paychecks, it also comes up in other situations. For example, you can get a tax refund via direct deposit instead of a check. You may also have the option of setting up direct deposit for investment-related dividends, retirement account payments, Social Security benefits, and unemployment benefits.Whoever the payer is, you typically need to fill out a direct deposit form — either online or in paper form — to set up direct deposit. Here’s a list of what you may need to accurately complete the form.
Your Bank’s Routing Number
A routing number (also known as the American Bankers Association, or ABA, number) is a nine-digit number that identifies your bank during a financial transaction. The routing number for your checking account is typically printed on the front of the check on the bottom left side. You can find the routing number for a savings account by logging into your account or looking at your bank statement.
Your Account Number
Every account has its own number — think of it like a fingerprint. If you have both a checking account and savings account at the same bank, they will have different account numbers. You can typically find the account number for your checking account printed on the front of a check just to the right of the routing number. You can find your savings account number by logging into your account or looking at your bank statement.Recommended: How Many Bank Accounts Should You Have?
The Type of Account
With direct deposit, you can typically choose to have the money transferred into your checking or savings account. As a result, the direct deposit form usually offers boxes with account types; simply check off what type of account you’re selecting. In some cases, you may be able to split up the deposit — say, have 80% put into checking and 20% put into savings. This can be a good way to automate your savings.
The Mailing Address of Your Bank
Here, you put the address of the branch you typically go to. If it’s an online-only bank, you can find the bank’s mailing address by logging into your account.
A Voided Check
Many employers ask for a voided check when you sign up for direct deposit. That way, they can confirm your routing and account numbers. To void a check, you simply write “VOID” in large letters across the front of a blank check. This will prevent anyone from using it. You may also be able to use a deposit slip for your account (sometimes attached to your checkbook).
Other Information You Might Need
In some cases, an employer will ask you to provide your Social Security number and/or mailing address.
Steps for Setting up Direct Deposit
The process for setting up direct deposit is typically the same, no matter who the employer or payer is. It generally only requires a few simple steps.
Ask your employer for the direct deposit form. This may be a paper form or you may be able to access the form online through your employer’s benefits portal. If your employer doesn’t have a form, you may be able to get one from your bank; these are often available online and may be prefilled with all of your account information.
Fill out the form. You’ll likely need to provide most or all of the information listed above. If you get the form from your bank, you’ll need to fill in your employer information.
Choose a deposit amount. This is typically the amount of your paycheck. However, you may be able to split your pay up. You might want most of it to go into your checking account and a smaller portion to go into a high-yield savings account to take advantage of a higher annual percentage yield (APY).
Attach a voided check if required. Even though you provided all of your account information, you may be asked to attach (or, if you’re signing up electronically, scan) a voided check. You may also have the option of attaching or scanning a deposit slip.
Submit the form. If it’s online, you’ll simply hit a button labeled something like “complete” or “submit.” If it’s a physical piece of paper, you’ll want to be sure you give it directly to someone from payroll or human resources since the form contains sensitive information.
How Long Does Setting Up Direct Deposits Take?
Setting up direct deposit typically takes one to two pay cycles, depending on the employer or payment provider. While some banks process it within a few days, initial setup requires verification. During this time, you may receive a paper check until the direct deposit becomes active in your account.
Confirming if Your Direct Deposit Is Set Up Correctly
You’ll know direct deposit has started when you don’t receive a physical paycheck or you get a pay stub rather than a check at the end of a pay period. At this point, it’s a good idea to log into the appropriate bank account and check to see if your pay has been credited to the account and in the correct amount. If it’s not there or the amount is incorrect, reach out to your employer’s payroll department.Even though the beauty of direct deposit is that it doesn’t require any action on your part, it’s a good idea to periodically check your accounts and make sure everything is getting deposited as it should.Recommended: Guide to Opening a Savings Account
The Takeaway
Setting up direct deposit is a simple and secure way to receive payments efficiently. By providing the necessary banking details and following your employer or payment provider’s process, you can ensure quick, hassle-free deposits.You can even consider splitting your deposit into both your checking and savings accounts. If you don’t have a savings account or you have one that pays a low APY, you may want to consider opening a high-yield savings account, which typically pays significantly more than the average interest on a savings account. With Lantern by SoFi’s online banking marketplace, it’s quick and easy to compare high-yield savings accounts based on APY, fees, and balance minimums.Lantern can help you compare online savings accounts and find today’s best rate.
Frequently Asked Questions
Do all employers offer to direct deposit paychecks?
What information is required when setting up direct deposit?
Do I need a bank account for direct deposit?
Photo credit: iStock/martin-dm
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About the Author
Chris Alexis
Chris Alexis has been putting pen to paper and fingertips to keyboard since his youth. He ultimately grew into an accomplished and award-winning writer who loves using the power of language to connect with audiences. He also strongly enjoys learning about who he is writing for so he can create something that will truly resonate with them. He has worked for a variety of companies, each of which have given him more experience and insight.
