9 Ways To Make More Money When You Direct Deposit Your Paycheck

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Direct depositing your paycheck can help you build wealth faster — in more ways than you realize. 

Whether you currently have your paycheck directly deposited or not, consider the following ways to set up your banking better. You can save money on interest by paying down debts faster, saving and investing more, growing your net worth, and starting to earn passive income from your investments. 

Avoid Check-Cashing Services

The most obvious benefit of direct deposits is that they allow you to avoid overpriced check-cashing services.

The unbanked and underbanked tend to rank among the most financially vulnerable, yet they pay relatively more in banking fees. Check cashing services charge anywhere from a flat fee of a few dollars up to 2% of the cashed check. 

They also leave you walking around with your entire paycheck in cash, ripe for loss or theft. 

If you don’t have a checking account set up, open one now. Then, set up direct deposit for your paycheck.

Reduce Spending by Splitting Your Direct Deposit

Most payroll services allow you to split your paycheck to direct deposit into multiple accounts. 

If you aim for a savings rate of 15%, you can automatically deposit 15% of every paycheck directly into your savings account. Out of sight, out of mind, and out of your available cash balance in your day-to-day checking account. 

Or Automate Transfers to Savings

Does your employer’s payroll service not offer to split your direct deposit? 

No problem. Since your regular paycheck gets direct deposited into your checking account on a regular interval, you can schedule automated recurring transfers to your savings account. Schedule these for one or two days after your direct deposit hits your checking account. 

It serves the same broader purpose: getting money out of your checking account and into savings before you have a chance to spend it.

Earn Interest with a High-Yield Savings Account

The money in your savings account doesn’t have to sit idle. Put it to work earning interest for you with a high-yield savings account. 

We all need some cash standing by, if only for an emergency fund. Earn the highest interest you can on it, by having your direct deposit split into a high-yield savings account. 

Set Up Goal-Specific Accounts

Some people set up separate savings accounts for each goal to stay motivated and keep their long-term goals in mind. 

For example, say you want to buy a house within the next 18 months. In addition to your emergency fund, you open another savings account for your down payment and closing costs. 

You could set up accounts for upcoming vacations or a big-ticket item like a new television or furniture set. Perhaps your company’s payroll can split your direct deposit into three or four accounts, but if not, you can simply set up automated recurring transfers after each paycheck. 

Automate Your Investments With a Robo-Advisor

As money hits a robo-advisor account, your advisor automatically invests it for you based on your account settings. You can also combine automated deposits with these automated investments. 

Your employer may be able to split your direct deposit so part of your paycheck goes directly to your robo-advisor account. But if not, robo-advisors let you schedule recurring transfers. You can set these up to come out of your checking account within a few days of each paycheck’s direct deposit. 

With every dollar you invest, you make more money by earning returns. You put your money to work for you rather than the other way around. 

Set Up Recurring Credit Card Payments

Likewise, when you know the exact dates when your paycheck gets deposited into your checking account, you can schedule automated credit card payments for within a couple days of each deposit. 

Log into your credit card account and schedule payments from each paycheck. By doing so, you can pay off any stubborn balances faster and as the first priority paid from each paycheck.

Set Up Biweekly Mortgage Payments

Most people get paid biweekly yet pay their mortgage monthly. 

To align your pay schedule with your largest living expense, set up biweekly mortgage payments, again within a few days of each direct deposit. You can even use this strategy to painlessly pay off your mortgage faster by scheduling half-month payments to come out of your checking account biweekly. 

That comes to 26 half-month payments each year, or 13 months’ worth of payments. With an extra monthly payment going straight toward your principal balance each year, you’ll not only pay down your principal faster but also skip ahead in the amortization schedule to avoid the worst of the interest.

Track Your Progress Automatically

When you manage all of your money through electronic banking and direct deposits, you can use third-party software tools to track your budget and net worth. For example, you can track these automatically through YNAB (short for You Need a Budget), Empower, or Rocket Money. 

Apps like these help you spot leakages in your budget where you’re spending more than intended. Many notify you of unusual spending patterns and help you spot fraud. And watching your net worth change in real-time helps motivate you to keep saving and investing over the more immediate gratification of spending splurges.

It’s harder to keep a high-level view of your spending and net worth when you take your paycheck in cash, or leave your money under your mattress. 

Final Thoughts

With direct deposited paychecks that hit your account like clockwork, you can automate all of your savings, investments, and debt payoffs. 

Your self-discipline and motivation will fail you sooner or later. Don’t rely on them for your financial goals, don’t just save “whatever’s left over at the end of the month.” Automate your savings and investments so they take place without you having to lift a finger. 

Do that, and you’ll make steady progress toward your goals every single time you get paid.

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