Guide to Direct Deposit: How to Make Deposits the Easy Way

Discover the benefits of direct deposit, an easy way to receive payments directly into your bank account. Get faster access to funds, eliminate the hassle of physical checks, and manage your finances with automated bill payments and savings.
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Written by Shannon Lee
Financial Expert
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Managing Editor
Our methodology is designed to provide consumers with unbiased and comprehensive evaluations of various banking products. Visit our Editorial Policy page for more information.

It might seem complicated or risky if you have never used direct deposit before. The truth is that direct deposit is a very safe way to handle transferring funds from one account to another. It’s so safe that millions of people use it daily – it’s even a favored payment method for the U.S. government. Here’s what you need to know.

What Is Direct Deposit?

A direct deposit is a way of paying someone through a fully automated system handled by your banking institution. When a person initiates a direct deposit, they automatically send an electronic payment that is transferred into your checking or savings account. You don’t have to do anything to get your money. There are no physical checks or any reason to visit the bank. And you can always expect your check to arrive on the promised date.

It’s so convenient that it has become ubiquitous; according to the Getting Paid In America Survey by the American Payroll Association, over 93% of workers in the United States currently receive their checks via direct deposit. Some employers will pay only via this method.

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How Do You Get Started with Direct Deposit?

The process of starting direct deposit is the same across the board. No matter how many times you set up direct deposit with a different employer, you can expect to take these simple steps:

Fill Out the Easy Form

This will include basic information such as your name, address, social security number, and signature. This form will also request your banking information, including your routing and account numbers. Your bank will gladly help you if you need clarification on what these are.

Choose Your Deposit Amount

You can choose to apply your entire direct deposit to one account or split it by whatever percentage you’d like, sending money to separate accounts. For instance, you could put a certain amount, such as 10% or 20%, into a savings account and deposit the rest in checking.

Attach a Voided Check or a Voided Deposit Slip

This helps ensure that the routing and banking information you included on the form is the same as what is on the actual physical check or deposit slip. It helps prevent your money from going to the wrong person.

Submit the Form with Care

If you work in a traditional office, hand this form directly to human resources or whoever has been designated to handle it. This helps ensure your very personal banking information stays as private as possible. If you are sending it online, use a secure file transfer service. Many banks make it easy to access this service.

What if you don’t have a voided check or deposit slip? This might be the case if you choose online banking only and you’ve never had any physical checks. An employer might prefer a voided check or deposit slip because these documents have the routing number and account number at the bottom; this allows them to double-check the information you entered on the form and be confident that you got it right.

You can still have direct deposit if you don’t have a voided check or deposit slip. You can get a direct deposit form from your bank with the pertinent information, bank documentation with the information you need, or a statement that includes the same. Ultimately, your employer will let you know what alternatives to a voided check or deposit slip will work for them.

How Does Direct Deposit Work?

The direct deposit process is almost always seamless. It begins with the employer collecting all the information listed above. Your information is entered into the system, and usually, the direct deposit starts with the following pay period.

The employer sends payroll information to their bank a few days before payday. The bank then sends that to the Automated Clearing House (ACH). The representative sorts through the information and ensures that every amount due is routed to the correct financial institution. When your bank receives instructions from ACH, the bank processes the payment and credits your account with the right amount.

The timing is usually set for a particular date, so you might receive your check on the 15th of every month, assuming that’s when your employer has chosen to pay you. Direct deposit is something you can almost always count on, which makes it much easier to plan for paying bills and other necessities.

Suppose you receive a one-time payment or payments not necessarily scheduled on a specific date. In that case, your direct deposit will usually hit your bank within one to two days after the payer initiates the process.

What Are the Benefits of Direct Deposit?

Direct deposit offers many advantages, some of which we have already discussed. Let’s run through them here:

Safety

Your money is safe with direct deposit. Because no paper checks or cash is exchanged, the money flows from one account to another. You never have to worry about delayed, damaged, or lost checks.

Easy Budgeting Tool

You can plan accordingly since you know precisely when direct deposit will hit your account. If you use automatic bill pay options, you could pay your bills on the 16th of the month, knowing that your deposit will hit on the 15th. You don’t have to worry about waiting for a check to clear.

Saves Time

The convenience of direct deposit is apparent. You don’t have to pick up a paper check, go to the bank, deposit it, and wait for the funds to arrive. It’s even faster than a mobile deposit, which could take up to a day to hit the account.

Guaranteed Funds

With direct deposit, your employer or other payee promises to initiate the payment on a certain date. You can count on your funds moving from one account to another on that date. 

Remember that sometimes, your receiving bank might take a day to credit the funds – watch your first direct deposit closely to determine your bank’s internal policy.

Potentially Early Funding

Speaking of banking policies, some banks offer early funds from your direct deposit. They might do this once you have an established direct deposit that comes at the same time every month from a very reputable employer. They might give you the expected funds a day or two before the deposit hits the account. This nice perk can allow you to budget and plan what to do with the money.

Choose Where Your Money Goes

It’s simple to divide your direct deposit between bank accounts. This can help you save with each check; for example, you could drop 10% of your check into a dedicated savings account and not touch that money. What goes into your checking account is what you have to work with. That makes savings seamless and easy.

How Safe Is Direct Deposit?

Direct deposit is incredibly safe. It’s one of the safest methods of handling your money.

Just how safe? The Social Security Administration reports that they have never lost a direct deposit payment to any beneficiary since 1976. Millions of payments have always made their way to recipients, as promised.

Because direct deposit comes directly from one account into yours, there is no chance it can be lost or stolen. Your banking information is held in a secure manner that ensures no one but those responsible for the direct deposit process can see that information, so there is very little chance of theft of that information.

The biggest safety issue with direct deposit happens when the forms and voided checks are in your possession and handed over to someone else. For instance, that is the vulnerable moment when you might lose the paperwork. That’s another reason why it’s essential to ensure you hand your information over in person if you work in a traditional office or send it through a secure service if you transmit it online.

Why Direct Deposit Is Better Than Other Methods

A paper check can get lost in the mail, damaged, or stolen. It could be fraudulent. Someone else might be able to cash it. If a paper check is stolen or lost, you must go through several steps with your bank or employer to get that money back. Getting a paper check replaced often involves some fee.

If you are being paid in cash or money order, there are the potential downsides of that payment getting lost in the mail, intercepted by someone else, and unable to trace where the funds are at any given time.

What Can You Use Direct Deposit For?

While direct deposit is usually associated with employers, there are other ways that direct deposit makes sense. The United States government prefers to pay individuals through direct deposit for everything from Social Security benefits to tax refunds. You can also easily use direct deposit to receive child support payments or other court-mandated funds.

You can even use direct deposit through the “bill pay” option with some utility companies, phone companies, and other places where you might owe a monthly bill. This option usually uses the same ACH technology your employer uses to pay you, though the setup is easier.

Are There Any Drawbacks?

There are a few drawbacks to direct deposit, but there are some potential cons to be aware of:

Going Through the Process When Changing Banks

If you change your bank or accounts in the same institution, you must repeat the process. That can be a hassle.

Getting All the Information

Let’s say you have a fully online bank account, but your employer is firm on requiring a voided check or other documentation. Getting a paper statement from an online bank might incur a fee and take some time.

It might Take a Few Pay Periods to Get Started

Sometimes the wheels of human resources move at a snail’s pace. It may take time for you to turn in the paperwork and even more time for the powers to send it to the proper institution. You might expect one or two pay periods when you receive a paper check before direct deposit kicks in.

Could Feel Restrictive

If you are accustomed to paper checks, not having proof of your money in your hands might feel restrictive. And what if you don’t want to put all your money into the bank? You must go to the ATM to withdraw what you want, which might be inconvenient.

Frequently Asked Questions

How do I check the status of my direct deposit?

In most cases, log onto your bank account on the day the deposit was supposed to be received and make sure it’s there. Some banking institutions will take a day or two to “clear” the deposit, which means it might be 24-48 hours after initiation that the deposit is credited to your account.

Can I use direct deposit for everything?

The U.S. government prefers to pay via direct deposit, so if you receive Social Security benefits, you will be encouraged to use direct deposit into your bank account. Tax refunds are also through direct deposit. Though some small business employers might want to use paper checks, even small employers often use direct deposit these days.

What if my payday falls on a weekend?

In that case, you will likely receive your direct deposit on Friday. Employers and banking institutions are quite serious about ensuring that paychecks arrive on time, every time, even if that means they must pay their obligations a day or two early.

About Author
Shannon Lee
Shannon Lee, a versatile contributor to MoneyRates, is a freelance writer with a passion that spans over two decades. Her extensive writing portfolio encompasses a myriad of topics, ranging from personal finance and home improvement to education, relationships, and medical and health subjects. In addition to her prolific freelance career, Shannon is also a novelist. Shannon’s dedication to providing insightful and informative content makes her a valued voice in the world of personal finance.