How is possible for banks to get your paycheck into your account early?
"From a technical standpoint, any bank is capable of getting you your paycheck up to two days early ... but they choose not to because they make money holding your paycheck hostage for a day or two," Kate Wauck, Vice President of Communications for Wealthfront, told Business Insider. "It's referred to as 'float' which is basically banks double-counting deposits for a short period of time before they clear the transaction so they can earn interest on both of the amounts," she continued. "A bank credits a customer's account as soon as a check is deposited.
Some banks choose not to hold onto your direct deposits, though, which can provide incentive for you to bank with the institution.Faster access to your money. This perk especially useful if you're living paycheck to paycheck or have a big bill coming up. At the very least, having your money sooner is convenient.Some banks pay interest on their checking accounts, or you can transfer money from checking to a savings account that earns interest.
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Employers also make money by only paying employees once or twice every month. Both banks and employers work together, albeit indirectly, to keep employees' money from them:
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