Still using the old way of receiving a paycheck? Direct deposit is the fastest alternative to receiving your paycheck. Ditch the waiting via mail for your physical paychecks and have access to your funds immediately after your paycheck is deposited. There is little to no work on your end after setting it up initially and can be accessed without delays.
Direct deposit can be set up for any income like your tax refund, employment insurance, government benefits and virtually anything else. Here is everything you need to understand how direct deposit works.
How Direct Deposit Works
Direct deposit is a secured transfer method to deposit money directly into your bank account. This is usually used by employers, the government and other online services. Direct deposits are managed by Payments Canada, a public non-profit organization whose members include banks in Canada, loan companies, credit unions, life insurance companies etc. While direct deposits can take up to 2 days to complete, it is still the fastest process when compared to receiving a paper cheque in the mail.
Now that you know how direct deposit works, let’s have a look at how to set up direct deposit.
Set Up Your Direct Deposit
To set up a direct deposit, you will need your banking information including your transit number, institution number and bank account number. This information can be accessed either online through your financial institutions online banking app or in person when you speak to a customer experience associate. This direct deposit form is used to accept funds or allow pre-authorized debit transactions out of your bank account.
Pros and Cons
Pros of Direct Deposit
- Payment goes directly to your bank account
- Faster access to your funds
- Can be deposited into a prepaid credit card too
- No holds on direct deposits
- Environmentally friendly – reduce co2 emissions from delivery trucks
- safer and secure – without a physical copy of your cheque, it cannot be destroyed, lost or stolen
Cons of Direct Deposit
- Information must be updated if you switch banks or bank accounts
- If you need cash, you must use an ATM to withdraw funds
- Must have a bank account to use direct deposit
How direct deposit works is that if you are receiving money from an employer, the government or anywhere else, there is no fee for you. However, the employer is charged a fee to send the money.
Likewise, a common form of direct deposit being applied is when an Interac e-Transfer is sent or received. This is often used between businesses and between people. In this case, depending on your financial institution and account type, you may be charged to send an e-transfer. Not to be confused with direct deposit, with Interac e-Transfer you can send, request and automatically receive money using an email address or mobile phone number.
If you want to know more about other common bank fees and how to avoid them, check out this guide.
Now you know how direct deposit works, how to set it up, the pros and cons, as well as the fees associated with it. Ditch the traditional way and receive your funds faster.
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