Many banks and credit unions give you the option to set up direct deposit with your checking account. Not only can this give you faster access to your paycheck, but it can also help you manage your money better.
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Keep reading to learn how you can use direct deposit to improve your finances.
Your Bank Can Waive Certain Fees
Some financial institutions charge account fees, like monthly maintenance fees for instance. You can usually avoid this fee by keeping a minimum balance in your account or by setting up a direct deposit.
Setting up direct deposit can also help you avoid overdraft or non-sufficient funds (NSF) fees.
“A lot of banks will waive fees if you have consistent deposits coming into the account,” said Gloria Garcia Cisneros, a certified financial planner (CFP) and wealth manager at LourdMurray.
“This will also reduce the likelihood of overdraft if you have consistent streams of income flowing into the accounts to create a buffer. Overdraft fees are upwards of $30 at some banks which can add up quickly,” she added.
You Have Immediate Access to Your Paycheck
With direct deposit, you typically have more immediate access to your paycheck. This is because the funds usually go through faster than if you were to manually deposit your check.
And because your funds are available more quickly, you lower the risk of spending money you don’t have, according to Cisneros.
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You Can Reject Certain Charges
As Cisneros explained, “There are some banks that provide the option of choosing between allowing purchases to be made that exceed the funds in your account or rejecting purchases if you don’t have enough funds.
“This can be a great tool if you find yourself running into overdraft issues from nonessential purchases,” she added.
When you don’t have enough money in your account for a purchase, your bank will notify you instead of charging you a costly fee. And while you don’t need direct deposit to take advantage of this account perk, setting it up will help keep your balance accurate, so you’ll potentially run into this issue less often.
You Get Paid Earlier
Some banks, like Wells Fargo, offer what’s called “Early Pay Day.” This essentially lets you get paid up to two days early, which can help a lot if you’re living paycheck-to-paycheck — especially if you have a bill that comes due right around when you get paid.
What’s convenient about this type of feature is that you don’t have to manually set it up. All you have to do is enroll in direct deposit and it’ll be automatically activated.
But keep in mind that not all banks offer this tool. Check with yours to see if they offer “Early Pay Day” or something equivalent.
You Could Get a Grace Period
Not only can direct deposit get you quicker access to your funds, but it can also grant you a grace period. This is a brief window in which you can deposit money into your overdrawn account and avoid any associated fees.
Take Bank of America as an example. As part of the bank’s overdraft policy, you may be able to avoid overdraft fees by depositing money into your account by the end of the same business day. Wells Fargo also has a version of this called the “Extra Day Grace Period.”
So, how does this help you? Essentially, if you know you’re going to get paid via direct deposit by the end of the day, but a bill comes out of your account before then, you can rest a little easier knowing you won’t get charged a fee.
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This article originally appeared on GOBankingRates.com: 5 Ways Direct Deposit Can Help Your Money
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