The quickest and safest method of payment is through direct deposit. It saves employers and employees time and money by eliminating the need for physical checks and reducing data management needs. Some banks offer early access to direct deposit funds up to two days before the scheduled paycheck posting date.
Save Money
Access to your hard-earned paycheck two days early can help you avoid late fees by paying bills on time. It might facilitate conserving money and hasten the achievement of your financial objectives. The ability to receive two-day early direct deposit payments a few days earlier is a feature that banks and credit unions are increasingly offering. It’s a free service that could make money management less stressful and help you reach your financial goals more easily.
When you use direct deposit, your employer will send a payment file to the Federal Reserve and the individual banks and credit unions participating in the automated clearinghouse network (ACH). The ACH system will process and settle those payments with all participating institutions by the official payment date. Normally, the banks and credit unions that have your direct deposit will hold those funds until they get a notification from the Federal Reserve that it’s okay to release them.
Pay Your Bills on Time
Getting paid early is one way to make money management less stressful. It can also help you boost savings and pay bills on time. Direct deposit is an efficient and convenient method of receiving your paycheck. It saves the cost and time of printing, stuffing and mailing paper checks. It also helps reduce absenteeism because employees don’t have to take breaks to visit the bank. Plus, there’s no risk of lost or stolen checks, which is a real concern since 64% of Americans live paycheck to paycheck (Pymn).
The timing of when you get your funds varies depending on when your payer submits the payment information. Generally, banks will process direct deposits on the day they are received, up to two days before your scheduled pay date. However, some financial institutions offer early direct deposit services that can give you access to your money sooner than that. This service is typically provided by online banks, which operate without physical branches or by credit unions, the not-for-profit equivalent of banks that offer competitive APYs and minimal fees.
Build Your Savings
When you get paid early, you have cash to pay a bill before the due date or buy groceries and other essentials. The extra days help you reach savings goals like an emergency fund or vacation. If you’re a member of a bank that offers early direct deposit, your paycheck may be available up to two days earlier than your normal payday. Some banks provide this service for free, while others may charge a fee. Direct deposit funds are typically sent to your account via an automated clearing house (ACH) up to two days before the paycheck is posted. Once the money lands, the bank holds it until your payday.
Getting your money sooner can make it easier to pay bills and avoid overdraft fees on overdrawn accounts when you’re not expecting a payment. If you’re not a bank member offering the early direct deposit option, it might be worth signing up for this benefit. If you do, consider habitually setting aside a little bit each payday and adding it to your savings account. Even if it’s only $10 or $20, this small amount can decrease the stress of living paycheck to paycheck and add up over time.
Avoid Overdraft Fees
Overdraft fees can be expensive, so managing your checking account is important. One way to help is by linking a savings or line of credit account that offers Overdraft Protection to your checking account. These accounts help cover expenses when your checking account balance drops below zero. Sometimes, these protection services are free if you have been a good customer and have no history of incurring overdraft charges. Overdraft charges are a real problem in America.
Last year alone, banks paid out $2.8 billion in overdraft fees. There are, thankfully, methods to avoid these charges, such as selecting a service that enables you to get your direct deposit payment up to two days early. Some institution offers early direct deposit on their checking and savings accounts. While this service is relatively new, it’s a great way to get your money faster and potentially unlock extra perks with your bank. It allows you to access funds via ACH up to two days before your normal payroll processing date. The bank then holds these funds until the regular paycheck posting date. Enabling customers to access their funds sooner eliminates the need for overdraft fees and other costly late charges. It also allows consumers to make payments and purchases with more confidence.