Definition
An electronic payment that sends money such as your paycheck, tax refund or benefits straight into your bank account.
What it means
Direct deposit moves money electronically into your account instead of by paper check. Employers use it for pay, the IRS uses it for refunds, and the federal government requires electronic payment for Social Security and most other federal benefits. To set it up, you give the payer your bank's routing number, your account number and the account type. Direct deposits usually arrive faster and are safer than checks, which can be lost or stolen. The IRS lets you split a refund among up to three accounts using Form 8888. Many banks waive monthly fees if you have a direct deposit, and some make the money available a day or two early. Unbanked workers can often receive pay on a prepaid card that accepts direct deposits.
Example
A worker paid $1,500 every two weeks can direct $1,350 to checking and $150 to savings, saving $3,900 a year without moving money by hand.
Illustrative numbers only. Your situation will differ.