Complete Guide to Direct Deposit


Direct deposit is the use of bank deposit. A person or company can pay you directly, bypassing the traditional payment methods such as credit or debit card. It is a very convenient method of payment and can be used anywhere in the world. They are also the kind of payment that can be used to make payments to several people at a time. Direct deposit is also known to be secure, because the information it stores is not stored by the banks, but rather by the participating bank’s computers themselves.

Small business owners used to go to the bank to make payments or deposit checks. As per the 2020 “Getting Compensated In America” study by the American Payroll Association, 93% of businesses currently set aside direct installments to pay their payrolls. This means employees no longer have to deal with paper checks to collect their paychecks.

You’ve probably heard of direct deposit. But do you know how they work? Or maybe you’re wondering how to make a direct deposit. In this guide, we explain everything to you.

What is a direct deposit?

Direct deposits is a payment option that electronically transfers money to a bank account. It is often a faster and more convenient option than paper checks, and is particularly popular for paying payroll and receiving reimbursements. Direct deposit also helps reduce the risk of theft or scams.

A direct deposit generally relies on an electronic network called an automated clearing house (ACH), since it allows them between banks. The clearinghouse helps coordinate payments between financial institutions to reduce both workload and processing time.

How does direct deposit work for employers?

Direct deposit is a safe and efficient way to pay payroll. In order for an employer to pay their employees directly, they must obtain the payee’s bank name, account number, and bank routing number. The employee usually provides this information with a voided check or a secure online form provided by the company itself.

After that, the payer/employer sends the payroll information to the bank. The bank then sends this information to the ACH to make the necessary arrangements for the payments to reach the correct accounts. It may take several business days for ACH to release payments to employee banks.

How employees can sign up for direct deposit

To sign up for it, you must first apply to your employer. You may have to fill out an electronic form or a written document.

Typically, you’ll need to include your bank information:

  • An account and routing number, which is usually found on the back of your bank statements or on the bottom left of your checks.
  • Your bank address
  • A voided check (sometimes)

Provide a copy of a voided check, if required. Some employers need it to verify accounts and routing numbers. Next, you will need to specify the percentage of the money you want to deposit into your account. You can select 100%. In fact, some people deposit their money in more than one account. For example, in your checking and savings account. Finally, send the form to your employer and wait for it to be processed.

It may take a day or two for direct deposit to take effect. Check with your employer or the payroll department for more information.

Do I need a bank account to access direct deposit?

The most common is to have a bank account with direct deposit. However, if you don’t have one, there are several alternatives, including:

  • A prepaid debit card
  • mobile wallet

You can also consider opening an account in an online bank. It’s easy to create an account directly from your mobile phone.

What types of accounts work with direct deposit?

You can link your checking or savings account to receive a direct deposit. It is also possible to connect a debit card.

The main benefits of direct deposit

Here’s how it benefit you by:


  • Save the hassle of delivering checks;
  • Allows you to make payments from anywhere;
  • You can reduce costs and
  • Reduce the risk of confusion, complaints or stress related to payday.


  • Save the stress of losing or misplacing a check;
  • It allows to divide the money in different accounts;
  • Allows access to funds as soon as they are deposit and
  • It makes finances more predictable.

For all of these reasons, it has become a popular method for both employers and employees in the US When you use it to receive other payments, like your tax refund, you’ll enter the same type of information with the payer. It’s easy, safe and convenient.