Direct deposit gives you quick, automatic access to funds from a payment, like a paycheck or a Social Security check, that’s transferred electronically from a payer’s account to your bank account. The payer can skip writing paper checks and you don’t need to cash them.
Learn more about how direct deposit works and some of the benefits of receiving immediate payments.
[Read: Best Checking Accounts.]
What Is Direct Deposit?
Through direct deposit, an entity electronically sends a payment — like an employer issuing a paycheck — to your bank or credit union account. No paper checks are involved.
Nacha, previously known as the National Automated Clearing House Association, is the organization that oversees the U.S. system for processing direct deposits at banks, credit unions and other financial institutions. In 2024, the Nacha-governed ACH Network handled 8.6 billion direct deposit payments. Direct deposit is also known by these names:
— ACH (Automated Clearing House), the electronic payment system run by Nacha
— Electronic funds transfer (EFT)
— Electronic check (e-check)
— Direct payment
A 2024 survey of over 37,000 people by PayrollOrg found that almost 92% of American workers get their pay via direct deposit. Under federal law and some state laws, an employer can require an employee to be paid by electronic deposit.
Other payments you may be able to receive through direct deposit include:
— Tax refunds. The IRS says 80% of taxpayers receive their federal tax refunds through direct deposit.
— Social Security checks. More than 99% of Social Security recipients get their checks through direct deposit.
— Veterans’ benefits
— Unemployment benefits
— Child support payments
— Pension checks
— 401(k) withdrawals
— Financial aid for college students
[Read: Best Savings Accounts.]
How to Set Up Direct Deposit
The process of setting up direct deposit varies depending on what type of entity, such as an employer or a government agency, is sending the payment. This is how it generally works:
— Obtain a direct deposit authorization form from the entity sending payments to you.
— Complete the direct deposit form. Details you’ll probably need to provide include your financial institution’s name and address, your account number and routing number.
— Supply additional documents if requested. You may be asked to submit a voided check or deposit slip.
— If you’re splitting the direct deposit among several accounts, choose the amount you want to send to each account.
— Submit the direct deposit form to the entity sending payments to you.
You might be permitted to complete the signup process entirely online. Or you may be able to sign up for direct deposit by phone, at a bank branch or at a government office.
It can take one day to a few weeks for direct deposit to take effect. For a paycheck, it might be two pay periods before you stop getting a paper check and start getting a direct deposit.
[See: Best High-Yield Savings Accounts in 2025]
How Long Does a Direct Deposit Transfer Take?
A financial institution often credits a direct deposit to your account as soon as it receives the funds. However, if it receives the deposit on a Friday, the money may not be available until the next business day (which in this case would be Monday).
Access to the money might be delayed if a federal holiday falls on the business day after the financial institution receives the deposit. So, if a deposit arrives on a Tuesday but the next day (Wednesday) is a federal holiday, the money might not be available until the next business day (Thursday).
Some financial institutions let you access funds from a direct deposit (like a paycheck or Social Security check) up to two days early at no extra cost.
Reasons to Use Direct Deposit
— Avoid the loss or theft of a paper check or cash. Direct deposit is considered a safe and secure way to receive money and eliminates the risk of a check being lost or stolen.
— Speed up access to money. A direct deposit usually allows you to spend the money faster than if you had to deposit a paper check and wait for the check to clear.
— Save time. Because the money automatically goes into your bank account, you don’t need to head to a bank branch or ATM to deposit cash or a check.
— Ensure money is deposited. If you’re out of the office, for vacation or health-related reasons, you don’t need to wait until you return to get your money deposited.
— Avoid fees. If you set up direct deposit, some financial institutions might waive monthly maintenance fees or minimum balance fees.
— Encourage savings. You may be able to split a direct deposit between multiple accounts, such as a checking account and savings account.
Alternatives to Direct Deposit
Direct deposit is convenient, but it’s not the only way to get a payment. Alternatives include:
— Paper check
— Cash
— Prepaid debit card
— Payroll card
— Government benefits card
— Person-to-person money transfer service like Zelle, PayPal or Venmo
— Wire transfer
Several of these alternatives come at a cost to the recipient, while direct deposits are generally free.
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How to Set Up Direct Deposit at Your Bank originally appeared on usnews.com
Update 05/27/25: This story was previously published at an earlier date and has been updated with new information.
