To receive payments by direct deposit, a direct deposit form must be filled out and submitted. No paper check is issued, although an employee may still receive a payment stub or other payment documentation from their employer. When the payment goes through, the employee’s bank credits the funds to their account, and the employer’s bank debits their account for the same amount. This order is bundled with all the other ACH transactions for that day and scheduled. The employer then instructs their bank to transfer money into the employee’s account on a certain day. A voided check or deposit slip is often used. Using the example of a paycheck, direct deposit is set up with the employee providing their checking or savings account information to their employer. However, those without a bank account can sometimes use a prepaid debit card, also called a payroll card. It works when both parties have a bank account. This technology makes direct deposit possible. For employees, direct deposit really is “set and forget it.” How Does a Direct Deposit Work?Īutomated Clearing House (ACH) is an electronic network that lets banks bundle and process multiple transactions together into batches. They do not have to go pick up a check, take it to their bank to deposit, and then possibly wait a day or two for the funds to clear. The biggest benefit for employees is how direct deposit makes getting paid quick and seamless.

Additionally, because it reduces the amount of paper used to write checks or store financial transaction records, direct deposit is beneficial for the environment as well. Direct deposit also decreases the risk of lost payments and identity theft from stolen paper checks and paper billing statements. Businesses can save on resources needed for payroll and don’t have to worry about check fraud. Using direct deposit for payments has advantages for employers as well as employees. Learn More Today! What Are the Benefits of Direct Deposit?

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