A direct deposit (or direct credit), in banking, is a deposit of money by a payer directly into a payee's
bank account
A bank account is a financial account maintained by a bank or other financial institution in which the financial transactions between the bank and a customer are recorded. Each financial institution sets the terms and conditions for each type of ...
. Direct deposits are most commonly made by businesses in the payment of salaries and wages and for the payment of suppliers' accounts, but the facility can be used for payments for any purpose, such as payment of bills, taxes, and other government charges.
When making a direct deposit by means of electronic funds transfer, the payer also normally enters reference information to make it easy for the payee to recognise who made the deposit and which account to credit. The reference may be an account number, an invoice number, the payer's name, or some other meaningful identification. To ensure that the payee is aware of the deposit, the payer commonly follows up by sending to the payee
The direct deposit facility is often better known by country-specific payment systems used to action these payments such as the following:
*
Giro in most of Europe
*
ACH Network
In the United States, the ACH Network is the national automated clearing house (ACH) for electronic funds transfers established in the 1960s and 1970s. It processes financial transactions for consumers, businesses, and federal, state, and loca ...
(ACH) in the United States
*
Direct entry
The Australian financial system consists of the arrangements covering the borrowing and lending of funds and the transfer of ownership of financial claims in Australia, comprising:
* authorised deposit-taking institutions (ADIs) or financial inst ...
in Australia
Alternatives
If a funds recipient does not have a bank account, but a payer is obligated to pay by electronic funds transfer, alternative payment arrangements need to be made. For example, a US law of 1996 required the federal government to make
electronic payments, such as direct deposit, available by 1999. As a part of its implementation, the
US Treasury Department paired with
Comerica Bank
Comerica Incorporated is a financial services company headquartered in Dallas, Texas, and strategically aligned by three business segments: The Commercial Bank, The Retail Bank and Wealth Management. Comerica focuses on relationships, and helpin ...
and
MasterCard in 2008 to offer the Direct Express Debit
MasterCard prepaid debit card, which can be used to make payments to federal benefit recipients who do not have a bank account.
"Federal government chooses direct deposit and prepaid cards over mailing checks"
, BankCreditNews, 15 April 2013, accessed 22 April 2013.
See also
* Debit card
A debit card, also known as a check card or bank card is a payment card that can be used in place of cash to make purchases. The term '' plastic card'' includes the above and as an identity document. These are similar to a credit card, but ...
* Direct debit A direct debit or direct withdrawal is a financial transaction in which one organisation withdraws funds from a payer's bank account., https://www.directdebit.co.uk/direct-debit-explained/what-is-direct-debit/ Formally, the organisation that calls f ...
* Electronic bill payment
Electronic bill payment is a feature of online, mobile and telephone banking, similar in its effect to a giro, allowing a customer of a financial institution to transfer money from their transaction or credit card account to a creditor or ven ...
* Wire transfer
Wire transfer, bank transfer, or credit transfer, is a method of electronic funds transfer from one person or entity to another. A wire transfer can be made from one bank account to another bank account, or through a transfer of cash at a cash ...
References
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Banking terms