What is direct deposit?

Direct deposit (sometimes referred to as electronic funds transfer, or EFT) is an electronic way of sending and receiving payments. Money is deposited directly into the recipient’s bank account, rather than issuing a paper check. Recipients can choose to have money deposited into their checking or savings account.

Direct deposit payments are sent using the Automated Clearing House, or ACH, network. The money is sent electronically using encryption, keeping your bank account information safe.

Employers commonly use direct deposit to pay their employees, and government agencies often use direct deposit to send benefits and tax refunds.

What time of day does direct deposit hit?

Usually, you’ll have access to your direct deposit at the opening of business on your payday — by 9 a.m. In many cases, direct deposits hit accounts even earlier, often between midnight and 6 a.m. on payday morning.

But there are factors that can affect how long it takes your direct deposit to become available. That’s because there are several steps in the process of getting money from your company to your bank account.

Your employer sends payroll information. First, your employer will send a payment file to its bank, listing all employees, their bank account information and the amount they’re to be paid.

The ACH network processes the file. The employer’s bank then sends this information to an ACH Operator, typically either the Clearing House or the Federal Reserve, to work through the list and make sure all payments go to the correct places.

Your bank receives payment. Next, your bank receives payment from the ACH network.

Payment hits your account. Finally, your bank or credit union makes the money available in your account.

These steps can take a few days, but most companies start the process early so you’ll receive your money on payday. If a company doesn’t have the payroll information ready early enough, your money could be delayed.

While many people believe it takes three to five days for the ACH to process payments, the network moves quickly and can clear payments as soon as the same day.

Your bank also plays a role in when you get access to your pay. By law, banks must make direct deposits available by the next business day after the banking day the money is received from the ACH. But banks can choose to make the money available sooner than that — and many opt to give you access to your money right away.

Do direct deposits drop on Sundays?

Direct deposits don’t arrive on Sundays. That’s because the ACH network doesn’t settle payroll information on weekends or holidays when the Federal Reserve is closed. If your regular payday is scheduled to fall on a weekend, most employers will schedule payments to go out on the Friday before.

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Benefits of using direct deposit

Here are some of the advantages that come with using direct deposit.

Safety — With cash app direct deposit, you don’t have to worry about a paper check being lost or stolen. Direct deposit data is also encrypted, keeping your account information secure.

Quick access to your money — In many cases, you’ll have access to your money even before 9 a.m. on payday.

Convenience — Since your money goes straight into your bank account, you won’t have to pick up a check or run to the bank to deposit it. You can use the money right away.

Low costs — With direct deposit, there are no check-cashing fees or other charges. Many banks even allow you to waive checking account monthly maintenance fees by using direct deposit.

Savings options — When you set up your direct deposit, you can choose to split your payment — sending a certain percentage to your checking account and some to your savings account. This can make it easier to build up your savings.

Direct deposit without a bank account

You can usually take advantage of the benefits of cash app direct deposit even if you don’t have a bank account. Many employers offer pay cards as an option for getting paid. These are reloadable prepaid debit cards that an employer can use to send electronic payments directly to you. Your money is deposited onto your pay card on payday.

Pay cards work much like a traditional debit card. You can typically use pay cards to access your money at an ATM and to make purchases. You also get many of the same benefits you would with direct deposit — your money is secure, payments arrive quickly and you can avoid check-cashing fees.

It’s important to note that sometimes pay cards come with fees, though these are relatively uncommon. You may also need to pay ATM fees to withdraw cash from your pay card — though often you’ll be allowed one free ATM withdrawal per pay period.

Next steps: Setting up your direct deposit

In most cases, you can set up direct deposit through your employer by contacting the company’s payroll department (if you weren’t already asked about it when you were hired).

If you have a bank account, the payroll department will typically give you a short form to fill out with your account information, including routing number and account number. You may also be asked to supply a blank, voided check.

As you set up direct deposit, think about where you want the money deposited. It may be simpler to send your entire paycheck to your checking account, but the option to send a percentage of your pay directly into a savings account could be a way to help you achieve some of your financial goals. Another option may be to send a portion of your money to an investment account, where it may grow at a faster pace than in your savings.