Direct Deposit

Written By
Paul Tracy
Updated August 5, 2020

What is Direct Deposit?

Direct deposit refers to the electronic transfer of a cash payment into the recipient's bank account.

How Does Direct Deposit Work?

Direct deposit is a method of payment where a paying party, such as an employer or government agency, electronically transfers a payment in cash from its bank account into the bank account of the payee. Salaries and tax refunds are examples of payments commonly made through direct deposit.

Why Does Direct Deposit Matter?

Directly deposited money "clears" automatically, that is, it is immediately available for withdrawal, and does away with the need for and inconvenience of a paper check.