[custom_frame_left][/custom_frame_left]Have you ever wondered how your paycheck is directly deposited into your account every two weeks? Is it technology at work? Is it magic? Or is it just plain dumb luck? In this article we will attempt to have direct deposit demystified.
You might not be aware of this, but your funds don’t go directly from your employer’s bank account to your own. They go through quite a process, which relies on multiple people meeting strict deadlines and sticking to a schedule.
If you’ve ever had a delayed deposit, you know how frustrating it can be. Deposits are delayed when deadlines are missed. I decided to share this process with you so that you can better understand what it takes to make a direct deposit work, and how it might be delayed.
To illustrate the process we need to assume the following:
XYZ, Inc. is the employer
Far Away Credit Union is where XYZ, Inc. deposits the payroll money.
Amy, Joe, Cheryl, Jan and Alec are the employees of XYZ, Inc.
Now we’ll follow the flow of how the funds appear in your account every two weeks.
First, understand that XYZ, Inc has an account at Far Away Credit Union where they deposit the funds that will be transferred to their employees in the form of a direct deposited “paycheck.”
Every two weeks, XYZ, Inc. sends Far Away Credit Union a file which contains the names of their employees, the routing and transit number of each employee’s credit union or bank, along with the employee’s account number(s) and the amount each account should be credited.
This is the first place the process can fail. Did XYZ, Inc. send the file to their Credit Union in a timely manner?
This information is repeated for every employee that the employer intends to pay. Once the file is received by Far Away Credit Union, they will take that file and create smaller files for the financial institution of each employee.
The file could look something like this:
|Employee||Bank||Routing #||Account #||Amount|
|Amy||Bank of the World||123456789||25541||1242.10|
|Joe||Your Neighbor CU||216452131||546412||852.41|
|Cheryl||This and That CU||542187963||5461||1581.12|
|Jan||Bank of the State||659898982||1214||798.12|
As you can see, the monies must be distributed to multiple financial institutions in various locations. The Federal Reserve Bank is set up to handle the transfer of monies between financial institutions, so now the money that XYZ, Inc. deposited for this week’s payroll is taken from their account at Far Away Credit Union and deposited at the Federal Reserve Bank, which will then distribute payments to the credit unions and banks of XYZ, Inc.’s employees.
This is the second place where the process can fail. Did Far Away Credit Union miss a transmission time to send the file to the Federal Reserve Bank?
Once the payroll file reaches the Federal Reserve Bank, “The Fed” will electronically transfer all the payroll entries to the various financial institutions on the list. Any files destined for a bank or credit union are normally picked up at scheduled times during the day. If one transmission time is missed, the files will be picked up at the next schedule time.
Here is the third place where the process can fail. If a designated pick up time is missed, the deposit will be delayed.
Once the financial institutions receive the file, every effort is made to process the information and apply the credit to their member’s account without delay. This process is normally completed within an hour or so of receipt of the file. Financial institutions are quite aware of their responsibility to provide you with current and accurate information on their accounts, and how important their actions are to customers and their families.
This is the final, though rare, instance where the process might fail. Credit Unions and banks take pride in keeping their system reliability at near-perfect levels. However, sometimes mistakes happen.
So the next time you check your account to see if your paycheck has been deposited, you’ll know all the steps that were necessary to post that deposit. There are a great number of events that must occur on schedule for one deposit to be made. It is remarkable that there are seldom any delays. We at State Employees Credit Union pride ourselves on our ability to provide you prompt and accurate service. If you ever experience a delay in deposit, please let us know immediately.