HR Glossary
Direct Deposit

Direct Deposit

Updated on:
August 23, 2022


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Table of Content

What is a Direct Deposit?

Direct deposit is a method of payment that authorizes an employee's regular paycheck or monthly benefit check to be electronically deposited directly into their bank account.

Direct deposit is a convenient way for employees to receive a paycheck or pension check while still working. The direct deposit process typically takes two to three business days to complete.

Payroll departments often provide each participating employee with a direct deposit form or routing and account number, so that employees do not have to remember to write that information down or enter it into the payment interface.

If employers have multiple bank accounts, employees may designate which account the money is to be deposited into.

What is the benefits of Direct Deposit?

Using direct deposit for payments has advantages for employers as well as employees.

Perhaps the most important reason is that it allows people to get paid more quickly and easily. In the past, people had to wait for their paychecks to come in the mail, which could take days or even weeks. With direct deposit, people can get their money as soon as their employer processes their payroll.

Another reason why the direct deposit is so important is that it can help people avoid fees. For instance, if someone doesn't have enough money in their account to cover a check, they may be charged a bounced check fee. With direct deposit, there is no risk of this happening because the money is transferred directly into the account.

How Does a Direct Deposit Work?

Automated Clearing House (ACH) is an electronic network that lets banks bundle and process multiple transactions together into batches. This technology makes direct deposit possible.