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Key takeaways
- Most banks make direct deposit funds available by 6 AM on the day of the deposit. However, this can differ based on the bank’s policies and when payroll is submitted.
- Direct deposits do not typically process on weekends or federal holidays. If a payday falls on a non-business day, deposits are usually processed on the preceding business day.
- Direct deposits are the easiest way to get paid. They are more secure than physical checks, arrive faster, and cut out the need to visit a bank to deposit a check.
You’ve probably heard of direct deposit. Over 93% of Americans use it to get paid by their employer, according to the 2022 survey “Getting Paid in America” by the American Payroll Association. It’s easier, faster, and more secure than waiting for a paper check to arrive in the mail that you then have to go to the bank to cash. But how quick is it? And how exactly does it work? Read on to see when direct deposits usually hit so that you’ll be prepared next time you need funds fast.
What is Direct Deposit?
A direct deposit is an electronic payment sent by Automated Clearing House (ACH) that transfers funds directly into your bank account. Employers commonly use this method to distribute salaries, but it’s also used for tax refunds, social security benefits, and other types of payments.
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What Time of Day Do Direct Deposits Hit?
The exact time your deposit hits your account depends on your bank and your employer. Most employers submit payroll information ahead of time so that you will receive your direct deposit no later than 9 a.m. on payday. Typically the deposit will hit your account between midnight and 6 a.m. Direct deposits do not process over weekends, so if payday falls on a weekend or holiday, you typically receive it on the preceding weekday. For government direct deposits like Social Security benefits, expect them on the 2nd, 3rd, and 4th Wednesday of each month.
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How Do Direct Deposits Work?
Direct deposits are pretty straightforward.
Your employer sends the payroll information to the bank.
The ACH Network processes the information and sends the payment to each employee’s bank and credit union.
The bank receives the payment from the ACH Network.
The payment hits your account and is available.
Most companies initiate the direct deposit process 1 to 3 business days in advance to ensure you are paid on time. If the payroll department is delayed in submitting information to the Automated Clearing House (ACH), your direct deposit may be delayed. By law, all banks must make direct deposits available by the next business day following the ACH transaction.
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Reasons Your Direct Deposit Hasn’t Hit
If you’re expecting a direct deposit and it hasn’t arrived, several reasons could explain the delay:
Incomplete or Incorrect Information: If any details like the account number or routing number are incorrect, the transfer could be delayed or fail entirely.
Holidays and Weekends: If the expected deposit date falls on a weekend or bank holiday, the deposit might be processed the next business day.
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Bank Holds: In some cases, a bank might hold a deposit to verify the funds or for other security reasons.
Issues with the Payer: If your employer or the entity sending you money faces technical glitches or administrative issues, it might delay the transfer.
If you experience a delay, contact your payroll department. They can confirm whether or not they sent the payment information accurately and on time. Whatever the reason, they can help you figure out the issue.
Benefits of Using Direct Deposit
Direct deposits are one of life’s modern conveniences. They are more secure than physical checks, which can be lost, stolen, or damaged. They also usually arrive faster than paper checks ensuring timely payment and helping you avoid overdrafts. Direct deposits eliminate the need to visit a bank or ATM to deposit a check making your life easier. They also cost you less. You no longer have to pay check-cashing fees and many banks will waive checking account monthly maintenance fees when you set up direct deposit with them. Lastly, most employers let you divide your direct deposit between bank accounts making it easier to build up savings.
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Direct Deposit Without a Bank Account
Even without a traditional bank account, you can still receive direct deposits, believe it or not. Many financial institutions offer pay cards, which work like reloadable prepaid debit cards, complete with routing and account numbers, enabling employers to send electronic payments. While some of these cards come with fees, most do not.
How to Set Up Direct Deposit
Setting up direct deposit is a straightforward process and a standard practice for most employers. Your payroll department will provide you with a form requiring details like your name, address, bank’s name, routing number, and account number. Sometimes, they might ask for a void check, a deposit slip, or your signature on a consent form. Once you fill out and submit this form, you’re ready to start receiving direct deposits.
Final Thoughts
Direct deposits offer the quickest access to your money. Nonetheless, understanding the specifics of your payment method is important. As an employee awaiting your salary or as someone receiving different forms of electronic payment, knowing the details of how and when you’ll get paid is a good idea.
