If you live paycheck to paycheck, you likely worry about having enough money to pay bills on time. One feature a number of banks now offer could help make your life a little easier.
With some banks, your paycheck can be available up to two days before your typical payday if your employer uses direct deposit. This early access to your paycheck could help you keep up with bills and avoid late fees, especially on bills due around the time you receive your salary.
Here is a detailed explanation of how this feature works and some banks that provide it so you can take advantage of early direct deposit.
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How Does Direct Deposit Work?
Employers and businesses commonly use direct deposit, which is an electronic version of a paper check. Millions of consumers and businesses use the automated clearing house network, or ACH, to conduct payments, such as paying online for auto loans or credit card bills.
Businesses use ACH to pay employees their salaries and vendors their bills by direct deposit. Employees only need to provide the routing and account numbers for their checking or savings accounts. There is typically a delay, which can take two days, before the funds reach your account.
People prefer ACH to paper checks because payments arrive on time and it eliminates the hassle of delays and lost checks. “Over the years, direct deposit has become the primary way workers are paid since it is quicker, convenient and typically unlocks extra perks with your bank,” says Brian Walsh, certified financial planner and head of advice and planning at SoFi.
Direct deposits are a win-win for recipients and businesses since it enables faster payment processing and provides immediate access to deposited funds.
[Read: Best Savings Accounts.]
What Happens With Early Direct Deposit?
More banks and credit unions are now offering early direct deposit, giving customers faster access to their paychecks and allowing them to earn interest on their money sooner. “When your employer processes payroll, they submit the direct deposits to your bank, and as soon as your bank receives the funds you will have access to the money,” says Scott Lieberman, founder of TouchdownMoney.com. “The bank skips the usual waiting period for the funds to clear.”
Consumers typically have access to their funds two days sooner, which can be beneficial if your payday falls on a weekend. If you get paid twice a month, such as on the 15th and 30th, now you can start paying bills and earning interest by the 13th and 28th of each month.
“If your cash flow is tight, getting paid early could help you buy essential items or avoid fees and penalties that could come with paying bills late,” Walsh says. “If your cash flow is not tight, getting paid early could mean earning interest for a couple days longer.”
What if You Need Access to Paycheck Funds More Than 2 Days Early?
A variety of companies offer costly paycheck advance services. These companies allow you to get a portion of your next paycheck sooner, but the steep fees negate this benefit.
Here’s an example of how this works: You receive the $300 you need to pay for an unexpected expense a week before you get paid. After you get paid, the $300 is deducted from your paycheck to the paycheck advance company. Instead of paying interest, you pay a flat fee: $45 for the $300 loan. This works out to an annual percentage rate of 460%. Maximum loan amounts and fees vary from state to state, but all paycheck advance options are expensive.
Financial experts do not recommend you do this because you can easily get caught in a cycle of short paychecks. Re-examine your budget and see how you can save up a small amount of cash for an emergency like a car repair.
[Read: Best CD Rates.]
Banks That Offer Early Direct Deposit
A number of banks offer early direct deposit to your checking account. You should receive your paycheck up to two days earlier if you signed up for direct deposit from your employer, even if it is part-time work. Check with your bank for details, especially if you just signed up for direct deposit. This list isn’t exhaustive; check to see if your bank offers this service.
Ally Bank: Ally offers early direct deposit automatically if you receive recurring direct deposit payments to your checking account. The bank allows up to eight early direct deposits per account, per statement cycle, and each paycheck must be $10,000 or less. There is no minimum opening deposit and no monthly service fee. Your paycheck is available up to two days early.
Axos Bank: Direct Deposit Express is an automatic feature for Essential Checking customers with direct deposit. The service is free, and there is no minimum opening deposit and no monthly service fee. Your paycheck is available up to two days early.
Chime: Get your paycheck up to two days early when you set up direct deposit and receive a qualifying payment. There are no minimum balance fees or monthly service fees.
Capital One: Setting up direct deposit with the 360 checking account allows you to get paid up to two days early. There is no minimum opening deposit and no monthly service fee.
Dora Financial: Dora offers early direct deposit of up to two days on its fee-free checking account. There is no minimum balance required.
Fifth Third Bank: Customers who open a Fifth Third Momentum checking account get access to Early Pay. There is no enrollment required and no fee. Your paycheck is available up to two days early.
Huntington Bank: Early Pay of up to two days is available to Huntington Bank customers who have a checking account with direct deposit. The service is automatic. Fees and minimum balance requirements depend on which checking account you choose.
Regions Bank: Early Pay of up to two days is an automatic feature when you have qualifying direct deposits to any Regions deposit account or prepaid Regions Now card. Fees and minimum balance requirements depend on which account you select.
Simmons Bank: The Coin checking account from Simmons Bank comes with Early Payday of up to two days as an automatic feature. There is no minimum opening deposit and no monthly service fee.
SoFi: Set up direct deposit to your checking or savings account to automatically get paid up to two days early. There are no minimum balance fees or monthly maintenance fees.
Varo: Setting up early direct deposit to your Varo Bank Account allows you to get your paycheck and tax refund up to two days early. There is no minimum opening deposit and no monthly service fee.
Wealthfront: Early direct deposit of up to two days is available on the Wealthfront Individual Cash account. There is a $1 minimum opening deposit and no monthly service fee.
Wells Fargo: Early Pay Day from Wells Fargo provides access to your eligible direct deposits up to two days early. There’s no enrollment required. Monthly service fees vary by checking account type, and all require a $25 opening deposit.
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You Can Get Your Paycheck 2 Days Sooner originally appeared on usnews.com
Update 01/18/24: The story was previously published at an earlier date and has been updated with new information.
