What Are The Benefits Of Direct Deposits? – There Are Many Advantages Of Direct Deposits


We must first understand the meaning of direct deposit, how it is done and what are its uses. Before we will discuss what are the benefits of direct deposit.

As technology advances, transactions are processed faster. More information was needed to be transparent in every transaction. Like sending money to somebody in a distant location, in the past, cash is carried physically to the recipient. Today, data are transmitted to the recipients’ bank and the recipient withdraws the cash on their currency. Technology produced what is impossible in the past, to become possible. Gone were the days when we say ‘it is impossible’.


Direct Deposit is the process of transferring funds from one bank account to another. Direct Deposit is commonly used in paying employees payroll, payment of debit/credit card, payment of some utility bills and in sending money to somebody.


The employer can avail this direct deposit services from its depository bank. Employees may be required to open an account to the employers’ depository bank and subsequently submit their bank account number to their employer.

The transfer of fund in direct deposit is safe. The banks security measures vouch the safe handling of the fund.


The following are the benefits of Direct Deposit:

1) Less Paper Works

Papers are required to do the transactions are reduced. Almost all transactions are being done electronically.

On the part of the employer, using less paper means savings. In payroll that uses check to pay the employees, one check is needed to do the transfer of funds from the employers account to the account of the employees. The employer save the checks and envelop used to pay the salaries of its employees. Because less paper was used, the waste paper is reduces also. This will eventually result in reducing the needed trees to be cut to produce a paper.

2) Reduction of risk in handling big amount of cash

In Direct Deposit, no cash is physically transferred to the recipients place. The data of the fund transfer is electronically transmitted to the bank in the recipients place. After the employer submitted the required documents to its depository bank, the bank will transfer the amount to the individual accounts of the employees. The employees can then withdraw their salaries to the bank or through the automated teller machines (ATM). Usually employees do the withdrawal after office hours.

If the employer uses physical cash in paying the salaries of the employees, the payroll clerk will sort the cash, put inside the payroll envelope designated to each employee and distribute or release the payroll. In Direct Deposit, this task of the payroll clerk is eliminated. The payroll clerk can now do some office works. The employer saves on the time of the payroll clerk, on the time of the employees that will claim their salaries during office hours and on envelops use in releasing the payroll.

On the part of employees, they can withdraw only the amount that they needed. The remaining cash will be withdrawn when it is needed or it will become the savings of the employee.

3) The process is faster than paper check

Unlike paper checks that need to be verified if the signatures matched with the signature specimen submitted to the bank, if the check has enough funds and if the payee is the same person presenting the check. In the direct deposit if it is withdrawn through the automated teller machine, the process of verification is reduce to the security feature of the Automated Teller Machine to verify the authenticity of the card. If it is withdrawn through the bank counter, the teller will only verify that person making the withdrawal was the account owner or its authorized representative.

4) Convenient

Withdrawal of cash can be done at the convenient time of the account owner. The employee will not worry that the bank will close at a certain cut off time. The employee can always withdraw the cash even after office hours. The employee can even withdraw only the needed cash. Even if the employee is on vacation, there is no problem in getting the salary.

The employer was relieved of the hassle of safeguarding the unclaimed salary of employees that go on leave or on vacation.

5) No Check will be lost or stolen

Paper checks can be damage, misplaced or stolen. Banks do not honor a damage check. The payee needs to ask for a replacement from the person or entity that issued the check. With direct deposit the payee is assured that nobody can take it without proper authorization.

6) Early Payment if the payday falls on holiday

Usually employer or the payroll service provider will prepare the payroll earlier if the payday falls on holiday or a non banking day. The earlier the employer or the payroll service provider can process the payroll, the earlier the employees can withdraw the cash.

7) Confidentiality and security

All transaction and data submitted to the bank are treated as confidential. Limited person knows how much was deposited to the employees account. And nobody will know how much cash the employee withdraws.

Every deposit is handled securely by the banks security measures. The employer is assured that the total amount of payroll goes to all concerned employees. On the part of the employee, the withdrawal of cash can be controlled or planned. There is no need to carry large amount of money because it can easily be withdrawn.

8) Reliability

Direct deposit is a reliable way of transferring fund. Fund transfer by physically transferring of cash is slow and risky. In direct deposit, this risk is reduced as well as the possibility of committing an error during the transfer. Transferring funds using the direct deposit can be done in real time depending on the banks policy.
Depending on the banks policy, the outstanding balance of the account will earn an interest.