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Banking
Banking Education
How does Direct Deposit
work?
How does Direct Deposit
work?
The process is simple. The organization
paying you notifies your financial institution electronically that a
specified amount of money should be made available to you in an account
you designate. Federal Reserve Banks and financial institutions process
these electronic transactions through a national automated clearinghouse
(ACH) system.
You will receive a payment stub from the
organization paying you when your deposit is made. This stub is similar to
a deposit slip in that it indicates the date and amount of money deposited
into your account and may be used as proof of availability of funds.
However, you will not receive a payment stub with federal recurring
payments
With Direct Deposit, your funds are
available for use the morning of the payment date. If you go to your bank
and deposit your check in person, you might not have access to your funds
until the next day or longer. In addition, the confidentiality of your
payment is maintained when Direct Deposit is used because fewer people are
involved in the process of depositing your money. Finally, there is no
charge for Direct Deposit.
How do I begin Direct
Deposit?
Inquire at your financial institution for
information on beginning Direct Deposit. A member of the staff will be
able to answer any questions you may have about Direct Deposit and will
help you begin your service. In the case of company payroll payments, ask
your personnel or payroll department for information.
Benefits of Direct
Deposit
-
Security
- With Direct Deposit, you do not have
to worry about lost or stolen payment checks. Your payment is
automatically deposited safely into your account.
-
Convenience
- You do not have to take the time to go
to your financial institution to deposit your check. If you are out of
town, your payment will be deposited into your account in your absence,
allowing that money to immediately begin drawing whatever interest may
apply. Many payments are sent through the mail, losing up to 10 days of
interest. Direct Deposit eliminates the mailing period, so your payments
begin drawing interest on the day of deposit.
-
Simplicity
- Direct Deposit is easy to begin, and
you may change your financial institution, change the account receiving
the Direct Deposit or stop service by simply completing a form.
-
Flexibility
- You may have your funds deposited into
one of a variety of accounts, such as a money market account, a savings
account or a checking account, depending on your needs.
-
Reliability
- You can be assured your funds are
deposited into your designated account on time, correctly and
confidentially. Regulation E ensures proper handling of your account.
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