4 Uncommon Benefits of Setting Up Direct Deposit

Many U.S. employers offer direct deposit to their employees. This tends to be rather useful as it can limit the need for paper checks while allowing people more immediate access to their funds. But setting up direct deposit has some lesser-known benefits as well. Some of these are indirect or will take time to come to fruition, but they’re still worth knowing about.

If you’re thinking about setting up direct deposit but haven’t yet, here are some reasons why it could work in your favor .

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Account Structuring and Income Automation

When you set up direct deposit, you essentially agree to have your paycheck sent directly over to your linked bank account. This generally means you’ll get quicker access to your money — sometimes a couple of days sooner than if you were to manually scan or deposit a check. It can also cut down on any stress you might experience between pay periods.

But direct deposit also allows you to automate — and streamline — your finances across multiple accounts. That’s because direct deposit lets you divide your paycheck between several accounts, often based on a percentage of your paycheck amount. This can include your personal checking, personal savings and joint accounts.

“The first benefit that comes to mind around direct deposit is the ability to structure your accounts and automate the flow of your income,” said Gloria Garcia Cisneros, CFP and wealth manager at LourdMurray . “Most payroll systems have direct deposit capabilities, and if they don’t, you can set up automatic transfers to happen from your main checking account.”

The benefit here is twofold. Not only can this simplify your finances, but it can also help you keep better track of your funds. If you allocate some of your money to a savings or emergency fund, it can also provide a financial buffer in case something unexpected comes up.

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Waived Fees

According to Cisneros, some banks will waive fees if you have regular deposits coming into your account. This may include nonsufficient funds (NSF) fees or overdraft fees. Overdraft fees alone can easily be around $30 per transaction, though your bank may cap how many of these you’ll be charged.

Setting up direct deposit could also indirectly waive your account’s monthly maintenance fee. Some banks will waive this fee automatically if you keep a minimum balance in your account at all times. Having your paycheck automatically sent to your account can help you maintain this minimum balance, thereby avoiding this charge.

Convenience and Security

When you get paid via check, you run the risk of losing or misplacing it before you can deposit it. While you can generally just request a replacement check from your employer, this can take time and delay your payment. This isn’t an issue with direct deposit.

As an added bonus, direct deposit can be more secure than physical payment methods. No longer will you need to visit an ATM or bank branch to deposit your checks. This means you also don’t have to worry about loss or theft while you’re out, though you may also be able to avoid this by using an app.

Wealth-Building

Oftentimes, the simplification and quicker accessibility are enough of a reason to set up direct deposit. But a more uncommon benefit that people don’t often know about is that it can also help you build wealth.

“The benefit of depositing into various accounts — checking, savings and investment accounts — is that it creates systems that will automatically build wealth. The less we have to manually go in and implement our savings and investing habits, the more likely they will get done,” said Cisneros.

“I am a huge proponent of creating an automatic system that works for you,” Cisneros continued. “This can help you build savings and potentially grow your money. Personally, I have my paycheck being sent to my joint checking (bills), personal checking (personal fun money), savings (emergency fund and short-term goals) and 401(k). My finances are on autopilot essentially.”

If you have a hard time consistently saving money, direct deposit can get you on track to achieving your financial goals. And if you dedicate a portion of every paycheck to an account with a high annual percentage yield (APY), you can benefit even more from compounding interest, which will help your money grow faster.

This article originally appeared on GOBankingRates.com : 4 Uncommon Benefits of Setting Up Direct Deposit