The Many Benefits of Direct Deposit

Direct deposit is a method of payment where an employer electronically transfers funds into the employee’s checking or savings account. It’s a popular practice because it is convenient, secure, and efficient.

If you’re not already set up for it, there are a number of reasons why you should choose direct deposit for your personal use.

  • With Direct Deposit, you don’t have to go somewhere to physically cash or deposit your paycheck. This can be especially useful in situations where travel is limited, such as during inclement weather or public health emergencies.
  • You don’t have to be ‘at work’ to get your paycheck. If you work remote, are ill, or on vacation, your deposit will still be made and readily accessible.
  • We all lose things from time to time – that’s part of life. But have you ever misplaced a paycheck? It takes time and energy going through the process of getting a check re-issued. With direct deposit, there is no paper check to lose. It also removes the risk of a check getting damaged or lost in the mail.
  • You can control where your money goes. For example, you can direct most of your funds to your checking account for bills, and also automatically direct a portion of it to a savings or emergency fund. It’s a great way to build a balance without much effort.

Contact your local American Federal office to learn more about getting direct deposit set up for your accounts.

Is a Healthcare Savings Account Right for You?

With healthcare costs continually in the news, you may have heard about Health Savings Accounts (HSAs). HSAs are touted as a solution for controlling healthcare costs, but is an HSA right for you?

What is an HSA?

HSAs are tax-advantaged personal savings accounts where the money can only be used to pay for healthcare costs such as medical, dental and vision expenses. It is your money, but it must be spent on healthcare and is subject to IRS rules.

To qualify for an HSA, you must be insured by a High-Deductible Health Plan (HDHP). Although the deductible on an HDHP is high, the premiums are typically lower than most traditional plans. Likewise, the HDHP often covers many preventive services outside of the deductible. Once the deductible is hit, plan coverage begins.

HSAs and HDHPs were created to help control health care costs. The thought is that people will make better health care decisions if they’re using their own money. For example, a person with ‘skin in the game’ for their healthcare dollars who had a non-emergency medical need might be more likely to schedule a regular office visit rather than going to an emergency or walk-in clinic, which are traditionally more expensive.

HSA Advantages

  • You get to decide how much money to set aside for health care costs (within the allowed limits).
  • Leftover money at the end of the year rolls over into the next year, unlike traditional Flexible Spending Accounts.
  • Money going into your HSA is not taxed.
  • You control how to spend your HSA money and can shop around for care.

HSA Disadvantages

  • It can be difficult to accurately budget health care expenses.
  • HSA money used for nonmedical expenses will face a tax penalty.
  • The desire to build an HSA balance may lead some people to avoid medical care when they need it.

Is an HSA right for me?

Like any financial tool, you and your American Federal Banker need to determine if it’s a good fit for your situation. If you’re generally in good health and are interested in saving for future health care costs, an HSA may be of interest to you. Likewise, if you expect that you may have high healthcare costs in the coming year, but not enough to meet a high deductible, an HSA might not be the best choice for you.

Make an appointment with your American Federal Banker to determine if a Healthcare Savings Account is a good fit for your situation.

For tax-specific questions, always consult with your Tax advisor.