Direct deposit also known as direct credit is a banking term that describes a deposit of money straight from the source into a bank account, by electronic funds transfer, or other means where the payment is initiated by the payer not the payee. The money is transferred directly to the recipient bank through a payment system.
Direct deposits facilities are often a feature of online banking systems. The direct deposit or direct credit facility is often better known by country specific payment systems used to action these payments. For example:
- Giro in most of Europe
- Automated Clearing House (ACH) in the United States
- Direct Entry in Australia
Alternatives to direct deposit
The U.S. federal government and some employers provide alternative electronic payment options to recipients and employees. One alternative method is a prepaid debit card.
A U.S. federal law signed in 1996 contained a provision that required the federal government to make electronic payments such as direct deposit by 1999. As a part of implementation of the provision, in 2008 the U.S. Treasury Department paired with Comerica Bank and MasterCard to offer the Direct Express Debit MasterCard prepaid debit card. The card is 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 Apr 2013, Accessed 22 Apr 2013