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What Is Direct Deposit? How It Works and How You Can Set It Up

May 8, 2024

6 min Read

Written by Andrea Norris

Edited by Joe Evans

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More than 95% of people in America receive their paycheck through direct deposit, according to an American Payroll Organization survey. Direct deposit is convenient and saves both employees and employers money. Even better, a traditional bank account isn’t required to set it up.

If you’re still dealing with the inconvenience of a paper payroll or government checks, read on. Find out more about what direct deposit is, how it works and how to set up direct deposit so you’re prepared to make the switch.

What Is Direct Deposit and How Does It Work?

Direct deposit is an electronic transfer of funds from a payer to a payee’s account. You can set up direct deposits with the following types of accounts:

Traditional deposit bank accounts, such as checking or savings accounts
Investment brokerage accounts
Some prepaid debit cards, such as the Bluebird Card from American Express
Some payment apps, such as Cash App or PayPal

Once you set up direct deposit, you no longer receive a paper check from that payer. Instead, your employer or another payer transfers money into your account using ACH — the Automated Clearing House. ACH coordinates the transfer of funds from one bank account to another.

You can have your entire direct deposit payment go into one account or split it into multiple accounts. For instance, you can deposit part of your paycheck into your checking account and a certain percentage into your savings account.

Once the direct deposit payment is processed and transferred into your account, the funds are typically available that same day. However, some banks and payment apps may make the funds available as soon as the direct deposit is received rather than after it is processed, allowing you to get your money a day or two early.

What Are Some Examples of Direct Deposit Payments?

Paychecks aren’t the only thing that you can receive via direct deposit. You can also elect to use direct deposit to receive the following payments:

Pension payments
Investment payments, including mature CDs
Social Security checks
SSI payments
Tax refunds
Other government payments

How Do You Get Direct Deposit Set Up?

Setting up direct deposit is easy. You’ll follow the same basic steps to set up any direct deposit, whether with your bank, a payment app or a prepaid debit card.

How To Set Up Direct Deposit

If you want your direct deposit to go to your checking or savings accounts, take the following steps:

Get a Direct Deposit Form from the Payer: For instance, if you want to set up direct deposit for your paycheck, you’ll get the form from your employer. Your bank may also have a form for setting up direct deposit if the payer doesn’t have one.
Complete the Form: Ensure all information, especially your bank account and routing numbers, is correct to avoid payment delays. The routing number indicates your bank and the account number identifies your account.
Enter the Deposit Amount: You may deposit your entire check into one account or split it between accounts, like checking and savings.
Provide a Voided Check or Deposit Slip if Required: A voided check is best for a checking account because it lists almost all the information needed to set up direct deposit. The payer can ensure it matches the information on your form.
Return the Form to the Payer: Use your bank’s mobile app or submit the direct deposit form in person. Your routing number and your bank account numbers are sensitive information. Anyone with these numbers can set up fraudulent transfers from your account or create fake checks.

Before setting up direct deposit for a payment app or prepaid card, you may have to take steps (like activating your account) to make your account eligible for direct deposit. You also need to go through the process again if you decide to open an account at a new bank.

How To Find Your Account Number and Routing Number

For a checking account, you’ll find the routing number at the bottom of a check or deposit slip on the left side — it’s a nine-digit string of numbers. Your account number will be just to the right of your routing number, usually eight or nine digits long. You can also get this information by logging into online banking or your bank’s mobile app.

If you’re unsure where to find the routing or account numbers for prepaid cards or payment apps, you can get help online for your app or card.

Can You Set Up a Direct Deposit To Yourself?

If you’re self-employed, you can pay yourself through direct deposit if you have a business checking account. To do this, you can work with a payroll services company to process the transaction or contact your bank. A representative from the bank can explain how the ACH process works and guide you through the steps to set up the direct deposit.

Why Switch To Direct Deposit?

Three significant benefits of switching from paper checks to direct deposit include:

Speed: Funds are usually available to you on the same day they are deposited in your account, and many banks and payment apps make the funds available to you a day or two earlier.
Savings: You can avoid monthly maintenance and bank fees on checking and other accounts by using the account to receive a recurring direct deposit.
Security: Direct deposit is safer than receiving paper checks, which anyone can pluck right out of your mailbox. Paper checks can also be lost or stolen, neither of which is a problem if you have direct deposit.

Final Take

Direct deposit is the easier, faster and safer way to get paid. Setting up direct deposit with an employer is a relatively simple process — in most cases, you just need to complete a form accurately. Keep in mind that you’ll need to complete a new direct deposit form when you change banks or employers but after that initial step, you’ll receive your money effortlessly.

Allison Hache contributed to the reporting for this article.

Data is accurate as of May 8, 2024, and is subject to change.

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