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Direct deposit payments: A government pitch that makes sense

The federal government can't seem to decide whether it wants to intimidate or entice people into receiving payments like Old Age Security and tax refunds via direct deposit instead of cheques sent by mail.

Ottawa has actively been trying to get people to switch to direct deposit since 2012 and the campaign has gone well. But the feds still estimate they mailed 44 million payments for the fiscal year ended March 31, or 16 per cent of the estimated total of 277 million. On Public Works and Government Services Canada's directdeposit.gc.ca website, people still receiving cheques are told of the benefits of direct deposit – and there are plenty. But at least one other government website is using a tough-guy approach that leaves an erroneous impression that cheques are on the way out.

"The Government of Canada is switching from cheques to direct deposit for all government payments," the Service Canada website says on a page devoted to direct deposit. "If you are currently receiving benefit payments via cheque, you must enrol." Even the directdeposit.gc.ca website leaves an ambiguous impression. It says: "The government of Canada is switching from cheques to direct deposit, an electronic transfer of funds deposited directly into your bank account."

Direct deposit makes a ton of sense, but don't be frog-marched into switching if you don't want to. The government remains committed to sending cheques to those who prefer them, possibly because they don't have bank accounts.

"Direct deposit is not mandatory – it's optional," said Brigitte Fortin, assistant deputy minister for accounting, banking and compensation at Public Works and Government Services Canada. "People who are not enrolled will continue to receive their payments by cheque."

Government cheques are issued on a particular date and then mailed. That very sentence should sell you on direct deposit. Your money is deposited directly in your bank account on the date of issue and it's immediately accessible. Irrelevant are winter storms and the other forces that prevent your mail from arriving in a timely way.

Receiving your cheque is just half the battle. You then have to head to the bank or an ATM to deposit the cheque. A few banks have introduced mobile deposits, where you can take a picture of a cheque with your smartphone and submit it electronically for deposit without ever visiting a branch. But users of mobile deposits probably aren't using 300-year-old technology to get money they're owed (yup, cheques have been around that long). Direct deposit also helps you duck the hassle involved in fetching mail from the community mailboxes that Canada Post is using to replace door-to-door delivery for those who still have it.

The government says it costs 80 cents to produce a cheque, while a direct deposit payment costs about a dime. Ms. Fortin said the government expects to save about $17-million ultimately by promoting direct deposit and has already realized savings of $10-million. In addition to saving your tax dollars, Ottawa also argues in its pitch that about 32,600 trees will ultimately be saved by direct deposit.

Direct deposit also simplifies your banking by giving you immediate access to your money, eliminating any hold period that might apply. The Canadian Bankers Association reports that its members will cash a customer's federal government cheques for up to $1,500 with no holds; for larger cheques, a hold period of several days may apply. Note: Deposit of government cheques can be done to accounts at banks not only in Canada, but also in those in 48 countries (see the direct deposit website for a list).

It's important to understand that direct deposit has nothing to do with online banking. It's simply about moving money electronically from the government to you instead of via paper cheques. You don't need a computer to access your money and you don't need to sign up for online banking. If you like visiting bank branches, the only change when you switch to direct deposit is that you'll need a little less face time with bank staff.

Signing up for direct deposit is simple – you can do it phone, online, by mail or by going into a bank or credit union branch. Have a void cheque handy to quote your account number and the coding for your particular bank and branch.

Worried that if the government has access to your bank account, it can also withdraw money to cover, say, your income tax bill? It won't happen, Ms. Fortin said.

"Direct deposit is only for the purpose of depositing money, not for withdrawing money from the account," she said.

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