Direct deposit is a fast, convenient alternative to waiting for a paper cheque to arrive in the mail, and it requires no work on your end after the initial setup.
When you have a job, the easiest way to get paid is something called direct deposit. It’s a fast, convenient alternative to waiting for a paper cheque to arrive in the mail, and it requires no work on your end after the initial setup. When the money arrives in your bank account, you’ll be able to access it right away without any delays.
In addition to your paycheque, you can receive many types of payments through direct deposit: your tax refund, government benefits and other payments such as employment insurance (EI). While there’s no denying how useful direct deposit is, have you ever wondered how it works? Here’s what you need to know about direct deposit.
Direct deposit in Canada uses an electronic payment system to transfer funds between businesses and individuals. This system has detailed rules and procedures to ensure your money ends up in the right place — a lot is going on behind the scenes.
There are two main payment systems in Canada, both overseen owned and operated by Payments Canada: Lynx and Automated Clearing Settlement System (ACSS).
But all you really need to know is that direct deposit allows you to be paid electronically, which is usually more convenient than getting paid in cash or with a paper cheque.
In most cases, the easiest way to set up direct deposit is to provide the person paying you with a void cheque that shows all your banking numbers and details. If you don’t have any cheques, you can ask your financial institution for a printout of your direct deposit information.
Some employers require you to fill out a paper or electronic form with your direct deposit information. Here’s what you may need to provide:
Once you submit that information to your manager or payroll department, you’re good to go. Your payroll department will ensure that you’re paid the right amount on time. If you decide to switch banks or want your money to be deposited into a new bank account, you’ll need to update your direct deposit information.
Even though direct deposit is pretty seamless, you still need to be aware of some pros and cons.
