DEFINITION of 'Direct Deposit'

Electronic funds that are deposited directly into your bank account rather than through a paper check. Common uses of a direct deposit include income tax refunds and pay checks.

BREAKING DOWN 'Direct Deposit'

As a whole, direct deposit is the most popular form of payment as it eliminates the risk of losing a check and eliminates the need to physically visit a bank to make a deposit.

Direct deposit allows an employee's pay to be immediately available in their accounts at midnight the day before pay day and it is not subject to a check clearing wait period. Salaries paid via check can take a week or more to clear within their account.

Direct deposits are also popular for income tax refunds, as it is the fastest method of payment.

RELATED TERMS
  1. Bank Deposits

    Money placed into a banking institution for safekeeping. Bank ...
  2. Brokered Deposit

    A large-denomination bank deposit that is sold by a bank to a ...
  3. Call Deposit Account

    A bank account for investment funds that offers the advantages ...
  4. Deposit

    1. A transaction involving a transfer of funds to another party ...
  5. Remote Deposit Capture

    A technology-based method that lets banks accept checks for deposit ...
  6. Core Deposits

    The deposits made in a bank's natural demographic market. Banks ...
Related Articles
  1. Investing

    What is a Demand Deposit?

    A demand deposit is any type of account where the money in the account may be withdrawn at any time without prior notice to the financial institution.
  2. Investing

    Explaining Term Deposits

    A term deposit (more often called a certificate of deposit or CD) is a deposit account that is made for a specific period of time.
  3. Investing

    How Time Deposits Work

    A time deposit is an interest-bearing bank deposit that has a specific maturity date.
  4. Personal Finance

    The 8 Best Bank Perks

    Many banks are now offering free perks to entice new customers.
  5. Investing

    Best 2016 IRA Promotions (ETFC, BAC)

    Here are some of the best IRA promotions of 2016, with significant bonuses for large deposits.
  6. Investing

    What is a Bank?

    A bank is a financial institution licensed to receive deposits or issue new securities to the public.
  7. Personal Finance

    Best Checking Accounts For Couples

    Being a couple, especially if you both have jobs, can help you qualify for benefits and fee waivers that would be tougher to get on just one salary.
  8. Personal Finance

    The History Of The FDIC

    Find out why this corporation was developed and how it protects depositors from bank failure.
  9. Personal Finance

    Find the Best Savings Account Rates

    You know how to spot the highest interest rate, but how do you really get the best deal on savings accounts?
RELATED FAQS
  1. What are the benefits of splitting my tax refund?

    If you receive a refund when you file your tax return, there are some convenient options you can take advantage of. Read Answer >>
  2. What are the Federal Reserve's guidelines on demand deposit accounts?

    Read about some of the Federal Reserve's requirements and guidelines regarding the treatment, safeguarding and processing ... Read Answer >>
  3. What proportion of my income should I put into my demand deposit account?

    Find out how much money to keep in your liquid demand deposit accounts, such as checking or savings accounts, and discover ... Read Answer >>
  4. How do I get a split tax refund?

    You don't have to receive your tax refund in a lump sum. Learn the options you have for splitting the money the IRS owes ... Read Answer >>
Trading Center