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 transaction
A financial transaction is an Contract, agreement, or communication, between a buyer and seller to exchange goods, ...
. 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.
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
The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States. It is one of 15 current U.S. government departments.
The department oversees the Bureau of Engraving and ...
paired with
Comerica Bank
Comerica Incorporated is an American financial services company, headquartered in Dallas, Dallas, Texas. It is the parent of Comerica Bank, a regional commercial bank with 413 branches in the U.S. states of Texas, Michigan, California, Florida an ...
and
MasterCard in 2008 to offer the Direct Express Debit
MasterCard prepaid 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 card usually consists of the bank's name, a card number, the cardholder's name, and an expiration date, on either ...
, 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 card usually consists of the bank's name, a card number, the cardholder's name, and an expiration date, on either ...
* Direct debit
* 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 ve ...
* 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