Direct deposit - Definition

Direct deposit is a process where someone who is going to be paid on a recurring basis, such as an employee, or a recipient of a government entitlement or benefit program such as social security is sent the payment owed to them into their checking or savings account. The reasons for doing this include:

• Instant access to the funds via an ATM or check card.
• A check can be lost or stolen anywhere between the sender and the intended payee.
• Payments made electronically can be less expensive to the payor, typically electronic payments may cost around 25¢ (US) vs. up to $2 to generate, print and mail a paper check.

In the United States, the Automated Clearing House (ACH), operated by the Federal Reserve Bank, handles all interbank transfers, including direct deposit and direct withdrawl.

See also: paycheck

Example Usage of deposit