Direct deposit is a method of electronically depositing funds into a bank account, rather than through a physical paper check. Direct deposit requires the use of an electronic network, and the payer must have the recipients bank account number, routing number, and the name of their bank to transfer the funds. Alternatively, the recipient may provide a voided check with the same information printed on it. Direct deposit is most commonly used by businesses to pay salaries.

Direct deposit is a safe and convenient way to receive payment, and it eliminates the need for paper checks, which can be lost or stolen. Direct deposit recipients are not subject to a check clearing wait period, which can take a week or more to clear within their account. Direct deposit is also more cost-efficient than checks, as the transfer is electronic, which saves on the cost of printing and postage.

Direct deposit can be used for receiving wages, travel and expense reimbursements, pension/401(k) disbursements, annuities, dividend and interest payments, social security and other government payments, and tax and other refunds. Many employers allow employees to split their direct deposit between multiple accounts, which allows them to set up an automatic savings plan.

To set up direct deposit, the recipient must provide their banking information to the payer, and the payer will electronically send the funds to the recipients bank ahead of the upcoming payday. Direct deposit can be used to pay for nearly anything electronically, and its a no-touch, environmentally friendly way to use a checking or savings account to pay bills.

Its important to note that direct deposits do not include deposits to an account that are made by an individual using online/mobile banking or an internet payment provider such as PayPal.