May 11, 2002 – Remember the confusion some months ago when some of the V.I. government pension checks issued by the Government Employees Retirement System and processed through a Puerto Rico firm got "mislaid in the mail"? If you were one of those who didn't get the expected check at the expected time, you probably have reason to remember the event with dismay or financial pain.
Counterparts who had opted for "direct deposit" went merrily on their way and disposed as usual of their received funds, for they were not subject to mailbags.
Roberto Caravallo, general manager of the local Social Security Office remembers a time about a year ago, when all of the local Social Security checks that were sent through the U.S. Treasury Office in Philadelphia, were mislaid for some days. Fortunately, the Post Office located them before it was necessary to put stop-payments and reissue and remail the checks.
And remember back to the days of hurricanes Hugo and Marilyn? Banks had generators and got back up for business fairly quickly. But in most cases mail was delayed, stuck in Puerto Rico, or not delivered to country mailboxes until power lines and trees were cleared from roadways and driveways.
Remember how slow and worrisome the mails were after 9/11? After the anthrax scares?
Yes, monumental efforts were made to straighten out problems and end delays, and no one suffered in the long run. But there was some chaos and inconvenience and delay.
There was banking before ATMs
Many years ago, banks realized that some customers didn't want or have the time to stand in lines; they didn't need special services, just needed to put money in or take money out of their accounts; they wanted to do banking business outside banking hours. And so the idea of ATM was born, and short years later many people wonder how they ever survived before the ATM card.
Yet still the paper trail persists, checks are written and mailed and cashed and mislaid on the desk or in the mails. People still stand in line, and dread Monday mornings and government paydays at the bank.
And banks answered to the further need, setting up the concept of "direct deposit."
Banking with direct deposit
Direct deposit is an electronic transfer of funds that puts payments such as employee paychecks, Social security checks, GERS retirement checks, annuities, mutual fund disbursements, and other benefits directly into your checking or savings accounts without a printed check. Employees and individuals like direct deposit because there is no wait for mail delivery and so funds are available more quickly, no need to stand in line at the bank to make a deposit and to wait for funds to clear, and the funds cannot be lost or stolen.
All banks and federal credit unions in the Virgin Islands provide this banking utility.
"I've had direct deposit for over a year now," said Eleanor Bough of St. Thomas in a Banco Popular release. "Most significant for me as a disabled person is that direct deposit allows me mobility to do my own banking … without depending on others to do it for me."
V.I. government retirees can receive their pension and, when eligible, Social Security payments by direct deposit and have the funds instantly available the same day they are issued, in a secure, confidential transaction.
Yes, "glitches can happen," said vice president in charge of branches for JPMorgan Chase Bank Ariane Joseph-Lewis, "but we have a contingency plan in place." Customers are generally allowed an overdraw equivalent to the anticipated check that did not turn up on time.
Problems with direct deposit are very rare, said the NACHA, The Automated Clearing House Network, website. "The chance of having a problem with a check is 20 times greater than with direct deposit."
Easy for employers to set up, easy for individuals to set up
Employers favor direct deposit because, said Raymond Green, vice president of operations at Banco Popular in the Virgin Islands, "there's no printing, and the entire payroll is transferred as a single transaction and that makes the business's financial reconciliation simpler." Some businesses ever require their employees to use electronic paycheck receipt; Chase pays their employees in this manner. Companies can save up to $1.25 per paycheck by using direct deposit, estimates the NACHA site.
Both those banks have special personnel to assist businesses in setting up direct deposit for their payrolls. At Banco Popular, cash management sales officer Duane Hill specializes in this; software is available. At Chase, the service is provided by commercial relationship managers.
All U.S. banks in the Virgin Islands are mandated members of a bank clearinghouse, which means they are assigned the required "AB" routing numbers and therefore are able to provide the service to customers. Green mentioned Banco Popular's affiliation specifically with NACHA. Bankers say this is a federal requirement; no one from the Banking Board responded to queries about the board's oversight at this level.
Making individual arrangements is simple, usually just providing a blank, unused check or the AB routing number of a savings account, and waiting for a zero-dollar trial transaction to be processed. And for the occasional customer who resists having an account at all, some banks allow deposit to an ATM card or a low-cost special account.
"But I want to see the figures"
Many people, especially older ones who may remember bank failures and mail-train wrecks, want to see their incoming funds in print. GERS, the V.I. government, and most employers provide the old-fashioned check stub that details take-out amounts and gross and net totals. Social Security informs clients of any changes to any element in their checks by letter, and people can verify receipts either by getting the passbook updated or reviewing a monthly checking statement. And close examination will show you that virtually all of the payments are deposited on or ahead of the promised date.
The Social Security Administration urges residents who receive regular payments to use direct deposit. Social Security reported in 1999 that it has delivered more than 1.8 billion direct deposit payments worth $1.9 trillion over 23 years, and not one has ever been lost or stolen.
Project manager Carol Chapman of Banco Popular says, "More than half of all Americans use direct deposit to receive federal or business payments. Especially in the Virgin Islands, direct deposit is a real asset. Many of our seniors will no longer have to worry about how to get to the bank with their Social Security or GERS payments."
Direct Deposit Fact Sheet
(courtesy of Banco Popular)
Q: What is Direct Deposit and how does it work?
A: Direct Deposit is a safe, proven, confidential method of receiving a payment. Money is electronically transferred from a company or organization into your checking or savings account.
Q: Why is Direct Deposit good for consumers?
A: Direct Deposit is secure, convenient and fast. Payments made by Direct Deposit have never been lost. Direct Deposit saves consumers from waiting in lines at the bank or credit union, and it gives many people access to their money one to four days earlier than a check. The satisfaction rate for Direct Deposit is 97 percent.
Q: How do I know when my payment has been deposited?
A: Most employers will issue a payment stub that is identical to what you receive with a traditional paycheck. It will show how much was deposited in your account and how much was taken out of your pay for taxes, insurance and other items.
Q: When do I have access to the money?
A: Typically, your payment is available first thing in the morning on payday.
Q: If I sign up for Direct Deposit, how can I be sure that no one will have access to my account?
A: Direct Deposit is a confidential way to send and receive payments. Although yo
ur company does have a limited ability to reverse your Direct Deposit payment, it can only access funds that were deposited in error, generally when the company has issued the transaction twice or issued a deposit in the wrong amount. On average, fewer people see your account information with Direct Deposit than with checks.
Q: Can I divide my pay among different accounts if I use Direct Deposit?
A: Yes. You can have your pay deposited into one account or split among several accounts. This financial flexibility is one of Direct Deposit's best features. Decide once how you want your pay divided and your plan will be carried out automatically every pay period. This increases your financial control and discipline in saving for the future.
Q: How do I sign up for Direct Deposit?
A: First, find out if your employer offers Direct Deposit. If it is available, your human resources or payroll department can give you the authorization form. If Direct Deposit is not available, ask your human resources representative to consider offering it.
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