August Financial Fitness Challenge�Three (More) Reasons to Use Direct Deposit

I'm a big fan of direct deposit. I think of it as the first simple behavior in my money management mantra of "automate, automate, automate."

Successful money management, after all, is making good habits that add up over a lifetime to financial freedom and security. And a very effective way to make a habit is to automate it. Ergo�direct deposit.

If you need nudging, here are three reasons to use direct deposit.

Convenient

NACHA�The Electronic Payments Association, Herndon, Va., estimates that a worker spends anywhere from 8 � to 24 hours a year to cash or deposit paper paychecks. That time, multiplied by all the employees who still handle a paper paycheck, translates to an astonishing $3 billion to $5 billion loss in productivity each year. The case for convenience is pretty easy to make.

And when you consider that two of three households live paycheck to paycheck, it's clear that few of us can afford to delay making those crucial deposits.

NACHA finds that the U.S. lags other developed countries, where use of direct deposit is nearing 100%. In the States, 27% of employees still receive paper paychecks. For many in that group the service isn't available from employers, while others just resist using it.

Safe

If convenience doesn't persuade you, consider safety. The Treasury Department considers direct deposit so safe that this year, the department urges those taking part in the annual National Night Out on Aug. 3 to promote financial safety by distributing Go Direct campaign fliers at neighborhood events. National Night Out brings communities and local law enforcement together to increase crime prevention awareness.

The Treasury promotes direct deposit through its national Go Direct campaign, and backs Go Direct as one way senior citizens and others can protect their money from financial crimes such as check theft and fraud.

And if you still need reasons to adopt direct deposit, there's the environmental payoff. It's big.

Eco-friendly

Say a business employs 300 people and issues paychecks every two weeks. NACHA and the Pay It Green coalition say if this firm switched to direct deposit, in one year, it would save 121 pounds of paper, avoid the release of 1,159 gallons of wastewater into the environment, save 45 gallons of gas, and avoid the release of 346 pounds of greenhouse gases into the atmosphere. Those are some indirect financial benefits.

There are direct financial benefits for businesses as well. Businesses using direct deposit for payroll can save anywhere from $2.87 to $3.15 a paycheck. A business with 25 employees would save at least $2,000 a year; a business with 100 employees could save $19,000 each year, and larger businesses much more.

And we've reported before about the NACHA and Consumer Federation of America survey of a few years ago that found that direct deposit users save $390 a month, $90 more than those saving manually. For my money, that's the strongest persuasion of all.

If you have the option to use direct deposit of net pay at your workplace but aren't using it, I have to ask�What are you waiting for? And if your employer doesn't offer it yet, share some of these figures. It may be all the encouragement your company needs to offer direct deposit.

Financial Fitness Challenge

The people at your credit union bring you this Web site and other tools, such as direct deposit, to help you make the most of your financial resources. In 2010, the Financial Fitness Challenge continues to look at ways you can make better financial habits no matter what condition the economy is in.

Each month we randomly select five winners to receive $50 Visa gift cards; we choose each month's winners only from that month's entries, so enter often. Remember to register for the Financial Fitness Challenge.

ST
Susan Tiffany, CCUFC
[email protected]

Published August 2, 2010