You may have heard that some banks now offer early direct deposit of pay, and if so, your next question might be, "how do I find the banks with early pay?"
Early direct deposit of pay can deliver funds to workers up to 48 hours before payday. Even better, the service is usually free.
In this post, I will explain how early direct deposit of pay works and then I will mention a list of accounts that offer it.
To get early direct deposit, you have to find the right bank. Your employer will not have to change its banking relationship and neither will its payroll processing service. The system works based on messages sent between your employer's payroll service and your bank.
Let me explain how it works. Once I have done that, I will provide a list of banks that offer the early direct deposit of pay service.
For the sake of illustration, we'll use a company that runs payroll on Wednesday and distributes funds on Friday.
Wednesday: The payroll department, having reviewed your timesheet for the prior pay period, determines your after-tax wages. It sends a message to its payroll processor. Typically, the message will contain directions on where to send funds. The process is more complicated than you might think. Your company could be asking its processor to send money to four or five different destinations: your pay to your bank, a retirement contribution to a mutual fund company, health care premiums to an insurance company, tax obligations to the IRS and Social Security contributions to Social Security.
Later on Wednesday: The payroll processor sends a message to your bank that a deposit has been ordered.
Later on Wednesday: Your payroll processor sends a payment through an automated clearing house (an "ACH"). The receiving bank knows the money is coming, but it will not have access to the funds until they settle.
Still on Wednesday: Your bank, now knowing that funds are coming, releases the same amount of your account.
Friday (payday): Funds settle. Your bank credits those funds and restores your outstanding balance.
The process puts all of the risks on the bank and its processor.
In an ACH, sending and receiving banks deliver funds through an exchange mechanism. You probably make or receive an ACH every day without ever realizing how the system works. Nonetheless, you probably understand the pain points of ACH. If you have ever wondered why it takes so long to access your funds, the answer is that an ACH takes a few days. Rest assured that many bankers want to increase the speed of money transfer. Last year, same-day ACH became a reality. You can expect more and more payments to settle immediately through one of several "faster payment" networks.
Banks with Early Direct Deposit of Pay
plus - costs associated with using the account.
Varo Money Bank Account: Varo does not charge a monthly fee, provides access to a large network of surcharge-free ATMs, and never applies a transaction fee. It even offers free overseas transactions. Also, the company recently established a No Fee Overdraft service.
Green Dot: The Green Dot deposit account offers the ASAP Direct Deposit service. Cardholders who receive their paycheck by direct deposit can receive pay up to 2 days early. For those receiving government benefits, funds may be accessible four days early. Green Dot cards charge a monthly maintenance fee of between $7.95. The accounts offer access to free ATMs, no transaction fees. Monthly fees can be waived when customers meet certain conditions. Right now, you can receive the fee waiver if you spend $1,000 or more with your prepaid debit card in the prior month.
NetSpend: The NetSpend prepaid debit card charges cardholders a monthly fee of $8.95. The card does not provide access to free ATMs. If you can establish a direct deposit of at least $500, then you can qualify for the NetSpend Premier card account. If you do, then your monthly fee falls to $5, but there are still no free ATMs.
Chime Bank: The Chime bank account has no monthly fee, includes access to free ATMs, and does not charge transaction fees.
The Walmart MoneyCard: WalMart's prepaid debit card uses Green Dot's back end technology to offer the same suite of early direct deposit services. You can receive your paycheck up to two days early - and you can tap your government benefits as soon as four days earlier with this card. Walmart's version costs less than the Green Dot prepaid card, but more than Varo or Chime. You will pay $5 each month to have the account unless you receive direct deposits totaling at least $1,000. There is also a one-time fee to get the card. The Walmart card does not give access to a fee-free ATM network, but you can usually take out cash at the register.
A number of credit unions offer early direct deposit of pay, too. I will mention a few examples below, but it is important to understand that you will have to meet their standards for membership to open one of these accounts. If you are not familiar with these names, then it stands to reason that you will not be approved for an account. If you are familiar with them, then you probably do not need to read this blog, as you will already have received a direct communication from your CU with news of this option.
United States Federal Credit Union: Available to employees of several federal agencies. USFCU has several checking account options. One has no monthly fee while another waives the monthly fee for customers who maintain monthly balance of at least $2,000.
Hanscom Federal Credit Union: Most of their accounts are free, with exception of Premier Checking. However, Premier Checking's $9.95 fee can be waived by meeting an average daily balance requirement.
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