Direct deposit

What It Means

Direct deposit is money paid electronically into your bank or credit unionCredit unionA not-for-profit financial cooperative owned by its members, offering accounts and loans to people within the field of membership its charter sets. See more account, most often a paycheck or a government benefit. You give the payer your bank's routing number, your account number and the account type, and each payment arrives through the Automated Clearing House (ACH) network with no check to cash. Federal rules require your bank to make it available no later than the business day after it receives the deposit.

How It Sounds at Home

• "My paycheck hits on Friday morning."
• "HR needs a voided check for direct deposit."
• "Is your deposit in yet?"

The Breakdown

A short example. Keisha starts a new job paid every two weeks. She fills in the payroll department's direct deposit form with her credit union's routing number and her checking accountChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more number. Her first paycheck still comes as a paper check while payroll sets it up, and every one after that lands in her account on payday.

Where it goes wrong.

• A single wrong digit means the payment can't land in the right account, so copy the numbers straight from a check or your bank rather than from memory.
• Closing an old account before the new direct deposit has started leaves a paycheck with nowhere to go.
• Counting on the money earlier than the bank has to release it. Many banks make payroll available the day it arrives, but federal rules only guarantee the next business day.

What to watch.

• Your first pay statement, to confirm the deposit went to the account you chose.
• Your bank's funds availability policy, which gives the exact timing for your account.
• Whether direct deposit waives your account's monthly fee; the CFPB says many banks and credit unions do.

Good to Know

The CFPB's Ask CFPB answer on direct deposit and HelpWithMyBank.gov, run by the OCC, say a bank must make direct-deposit funds available no later than the business day after the banking day it receives them, under Regulation CC and ACH network rules. HelpWithMyBank.gov adds that many banks release payroll deposits right away, so ask your bank about its own policy for your account. For federal payments, the Treasury's Bureau of the Fiscal Service uses its own sign-up forms, such as SF 1199A, which ask for the same routing number, account number and account type.

Related Terms and Categories

• Paycheck budgeting

  Planning money one paycheck at a time, so each bill is paid from the paycheck that arrives before it's due and the rest is spending money.

• Pay frequency

  How often an employer pays you, usually weekly, every two weeks, twice a month or monthly, which sets how many paychecks you get in a year.

• Take-home pay

  The money that actually reaches you from a paycheck after taxes and other deductions are taken out, also called net pay or net income.

• Checking account

  A bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit.

• Automatic savings

  Saving that happens on a schedule without a decision each time, through a split direct deposit or a recurring transfer from checking to savings.

• Pay yourself first

  Moving a set amount into savings as soon as you're paid, before bills or spending, so saving comes first instead of from what's left.

Household money and budgeting