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Direct Deposit and Paycheck Allocations

Direct Deposit and Paycheck Allocations

A growing number of employers offer direct deposit, in which your regular paycheck is electronically -- and immediately -- deposited into the bank account of your choice. It is certainly a convenient way of getting paid. But did you know that direct deposit might also save you money?

The bottom line? If your company offers direct deposit, you should sign up for it.

The Benefits

What makes direct deposit so attractive? Your money will be immediately available to you on payday. You will not have to wait until the end of the workday to deposit a paper check yourself.

This can be significant if, like many consumers, you pay some or all of your bills through automatic withdrawals from your checking account. If you rely on direct deposit, your money will always get to your checking account on time. This lowers the risk of accidental overdrafts.

With direct deposit, your money will show up in your account even if you are sick on payday or on vacation when your human-resources department passes out your paycheck. With a paper check, you'd have to wait until you return to the office to deposit your money. With direct deposit, there is no delay; your money will be there for you.


The convenience factor is undeniable. However, direct deposit can also save you money throughout the year. That is because you will not have to drive to your bank with a paper paycheck every time you get paid. With the cost of a gallon of gas, these savings can add up.

Additionally, banks and credit unions often provide their customers with financial incentives to sign up for direct deposit. This is because direct deposit requires them to expend less labor on getting your money into your bank account.

How much can you save? According to a study done by Tinucci & Associates for NACHA, an electronic payment company, it can cost you an extra $5.88 to manually deposit your paycheck into your account versus through automated direct deposit.

Now, if you get paid every two weeks, that $5.88 savings can turn into more than $70 worth of savings a year. This can add up over time.

Splitting Accounts

Direct deposit can also help you build up your savings. You can tell your employer to split your paycheck -- in whatever manner you decide -- between different accounts. You could, for example, automatically deposit 80 percent of your paycheck to your checking account and 20 percent to your savings account.

Doing this allows you to build up your savings steadily without putting too much thought into it. That is key; it is easier to save money when it is automatically taken out of your check each pay period.

If you have not yet signed up for direct deposit, now is the time to do so. Electronic deposits, after all, can save you both time and money, and that is a benefit worth taking.

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