Most of us have probably heard of direct deposits. It seems to be the trend of our automated society. But the link between increased cases of identity theft and the use of direct deposits can be worrisome.
What are Direct Deposits?
Many employers offer the option of direct deposit-that is, in exchange for your bank account information, they will have your paycheck automatically deposited every payday. The idea is a convenient one that saves both time and gas money. The government takes advantage of it too, pushing recipients of Social Security to choose to have their funds directly deposited into their accounts. Mailing checks costs money, making direct deposit advantageous on their end as well.
But is it safe?
The direct deposit system has been around for over twenty years.
The United States Department of the Treasury and the Federal Reserve Banks sponsored a survey to dispel what they call the "direct deposit myths." The direct deposit system has been around for over twenty years. The survey found that 40 percent of Americans don't use direct deposits. The United States Department of the Treasury and the Federal Reserve Banks have developed a public service initiative called "Go Direct." Here's what they want you to know:
- Using paper checks instead of the direct deposit system puts consumers at greater risk for identity theft and fraud.
- Direct deposit is the safest way to receive federal benefits. There are regulations set up to prevent fraud and mistakes.
- Direct deposits eliminate the risk of lost or stolen checks. Paper checks are easily lost or misplaced.
- Direct deposits give people more control of their money. Direct deposit users know the exact date, time and (sometimes) the amount that will be deposited into their account.
- Direct deposits provide people with access to their money from virtually everywhere.
- You are thirty times more likely to have a problem with a check than with a direct deposit.
- Direct deposit payments normally arrive on the agreed upon date at the same time each month and become available for spending almost instantly.
- Since fewer people handle direct deposits there is less chance for fraud.
- There is usually no charge for direct deposits.
Dispelling the myths
When the results of the survey made by the United States Department of the Treasury and the Federal Reserve Banks came in, it was clear that the public believed in quite a few myths concerning direct deposits:
Myth: Sixty-two percent of those polled believed that a paper check with your name on it can only be cashed if you sign or endorse it.
Fact: It isn't that uncommon for checks to be forged. Mail-in payments are especially notorious for being used in fraud cases.
Dispelling the myths
Myth: Nearly half of those polled believed that direct deposits went through the Internet to be deposited in their accounts
Fact: A highly secure electronic banking system, not the Internet, deposits your funds into your bank account.
Any other problems?
Most problems with direct deposits seem to be at the bank level, and those problems, for the most part, involve things like:
- Changing the name/s on accounts
- Changing banks
- Confusing checking or savings accounts when the direct deposit is initially set up.
If you are considering authorizing a direct deposit, here are some guidelines to review:
- Make sure you use the exact bank account number you want your direct deposit funds to go into.
- Make sure you use the exact name of your account on your direct deposit records.
- Be sure to use the same name on both your account and application for direct deposit.
- If you plan on changing banks in the near future, it would be advisable to either wait to set up your direct deposit or to open the new account right away and set up your direct deposit in your new bank, if at all possible.
- If you are going to move after you have set up your direct deposit, make arrangements to change accounts well in advance of the day your direct deposit is due to be made.
- Always reconcile your bank statement to make sure your deposit has been credited to your account in a timely manner.
- If there is a problem, don't put it off, call the bank and keep calling until the situation is resolved to your satisfaction.
- When you first set your direct deposit up, call the bank on the day your check is supposed to be deposited to make certain your balance reflects the added money. It wouldn't hurt to check on this the first few times.
Direct deposits have proven to be one of the safest electronically automated systems used in today's high-tech world. It is hard to argue their convenience. And, if you do encounter a problem, there is support available for you.