What Is Direct Deposit?
Direct deposit is an electronic payment to a bank account that is typically sent by an employer or the government.
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
Direct deposit is an easier and faster way to receive income than paper checks.
Your employer or other organization that pays you must offer direct deposit for you to use it.
Direct deposit is a free and basic banking service that lets you get paid electronically. It’s a key reason to have a bank account.
What is direct deposit?
Direct deposit is a payment, usually from an employer or the government, that’s electronically transferred to an individual’s bank account or prepaid account. Common examples of direct deposits include paychecks, tax refunds, pensions, as well as Social Security and other government benefit payments. The term “direct deposit” refers to the service itself as well as the sum of money being deposited, or added, to an account.
Split direct deposits let you receive income in multiple accounts and can be a way to automatically save a portion of every paycheck in a savings account.
Traditionally, direct deposits can be set up for a checking or savings account at a bank or credit union, but you can also set them up for a prepaid debit card or an account at a non-bank technology firm, such as PayPal or Chime*. The alternative to direct deposit tends to be paper checks received in the mail, which may be slower.
How direct deposit works
Direct deposit is a type of online payment that’s typically processed through the Automated Clearing House network. ACH transfer is the umbrella category for direct deposits, bill payments and other types of online transactions. On a bank statement, you might see a direct deposit called an ACH credit since the money is credited, or pushed, into your account.
Getting direct deposit for tax refunds or government benefits is standard, but for wages, the availability of the service depends on the employer. If you’re able to receive direct deposits, fill out a form with your bank account number and routing number. Newly established direct deposits can take up to two pay cycles to start working. Learn more about how to set up direct deposit.
What is not considered direct deposit?
A direct deposit doesn’t include every electronic payment you receive. If you send funds between accounts you own at different banks or receive money from friends or family using peer-to-peer payment services like Zelle, those transactions generally don’t count as direct deposits. This distinction matters if a bank requires direct deposits to earn a sign-up bonus or to waive a monthly fee for a checking account.
How long does direct deposit take?
The exact timing varies, but there is a maximum time frame a bank has to comply with. A bank typically must make direct deposits available in a consumer’s account on the weekday after a bank receives the payment. If a business sends a bank the direct deposit funds on a weekend, bank holiday or after hours on a regular weekday, it can take an extra day or two to process.
Here are two scenarios during a regular week:
Direct deposit sent | Day that the bank receives it | Direct deposit delivered |
|---|---|---|
Monday. | Monday. | Tuesday. |
Sunday. | Monday. | Tuesday. |
What is two-day early direct deposit?
Two-day early direct deposit is a free service that some banks offer as a perk for their checking accounts. You’re able to get paid up to two days earlier than a scheduled payday, depending on your employer.
Here’s how it works: Many employers already send banks incoming payment information one to two days before the official payday. A bank can then deposit the money as soon as it gets that heads-up.
Pros to direct deposit
Faster, easier and safer than receiving mailed checks. Money can arrive in your bank account each payday without risk of funds getting lost or stolen in the mail. Plus, direct deposit is free, whereas there’s often a fee to cash a check at a place where you’re not a customer.
Ability to split direct deposits. This is available for tax refunds as well as paychecks, though you'll need to confirm with your employer. Social Security benefits, however, aren’t available for split direct deposits.
Cons to direct deposit
Processing delays, especially if a direct deposit goes out around a weekend or bank holiday.
General risk of data breach or scam, though it’s uncommon. In a payroll scam, a fraudster may email pretending to be from an employee’s payroll or human resources department and ask about a change to their direct deposit information. Checks also have risks, including check scams.
ON THIS PAGE
