Direct deposit is an electronic payment from one bank account to another. For example, money moves from an employer’s bank account to an employee’s bank account, although there are several other ways to use direct deposit. To make transfers, banks use the Automated Clearing House (ACH) network, which coordinates these payments among financial institutions. Here’s a look at how these work.

Automatic transactions: When you receive funds via a direct deposit, your account balance will automatically increase when the payment arrives. You don’t need to accept the payment or deposit funds to your account, which would be required if you received cash or a check. Likewise, when you pay with direct deposit, your checking account balance will automatically decrease when the payment leaves your bank.

Frequently used: Direct deposit has become increasingly popular because it does away with unnecessary paperwork, and tens of billions of ACH payments take place every year. For example, some branches of government, such as the Social Security Administration, no longer print checks. Instead, they require that you receive funds electronically (either through direct deposit or via a reloadable debit card). Even small employers enjoy the ease of making payments to not just employees but vendors.

There are several reasons for both businesses and consumers to use direct deposit including:

1. Automated deposits: When receiving funds by direct deposit, the funds are added to your account without any action required on your part. Whether you’re out of town or too busy to make it to the bank, your account will be credited.
2. No mail or paper: With electronic payments, you don’t need to print checks or pay to mail them. Payees don’t need to keep checking their mailbox. Also, payments don’t get lost as long as you set up the process up correctly the first time.
3. Electronic records: Everybody has a record of the payment, and it’s easy to see what happened in your checking account’s transaction history. You don’t need to manually write down details about a payment.
4. Security: Nobody can steal a check, alter it, or attempt to cash it. The funds seamlessly move from one checking account to another. 5.
5. Cost: It’s generally free to receive payments, and sending funds by ACH is often less expensive than other options—including paying accountants. Also, you don’t go through checks, envelopes, or postage as quickly. 6.
6. Faster pay: Sometimes payees get paid sooner, with deposits arriving in a person’s checking account a day or two earlier than a paper check arrives in the mail. Plus, the funds are available for spending immediately, and there’s no need to deposit the check and wait for it to clear.

To receive payments electronically, you need to provide bank account information to the organization that is paying you. They may require that you use a particular form (such as a direct deposit form) or you may be able to just provide a voided check. In some cases, you’ll need to provide your account information online.

To receive payments, you’ll need to provide the details below to the organization that will be paying you.

1. Bank account number
2. Routing number
3. Type of account (typically a checking account)
4. Bank name and address—you can use any branch of the bank or credit union you use
5. Name(s) of account holders listed on the account

You can find most of that information on any personal check, or you can call your bank and ask for direct deposit information. Details are often available online as well, but it’s best to log in to your account for accurate information. It’s worth noting that your bank routing and account numbers are sensitive information, so don’t provide those numbers to anybody unless you truly trust them.

Setting up direct deposit can take anywhere between a few days and a few weeks. Ask your employer what to expect so that you don’t look for your payments in the wrong place.

Once everything is set up, your payments will arrive in your bank account automatically. Be sure to check your available balance in your checking account before you try to spend any of that money. Government payments like tax refunds and Social Security benefits are typically available immediately. Other payments might be held for a few days, but payments from employers are generally available immediately.