How Direct Deposit Works

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How Direct Deposit Works

By completing a standard enrollment form, a person authorizes a company or organization to make Direct Deposit payments into one or more of the person's banking accounts.
The company or organization making the Direct Deposit performs a test run by sending the person's bank account information to the financial institution via the ACH Network. After the test, the company/organization is notified of any changes.
In the case of payroll payments, the company or organization processes the next pay period's payroll, prepares an ACH file and delivers it to their ACH Provider for transmission through the ACH network..
The employee's financial institution processes the information and on settlement day posts the payment to the employee's account.
The company or organization usually gives the employee a paper record of the payment. The employee's financial institution reports the transaction on the employee's monthly statement.

Sources:
Direct Deposit and Direct Payment Coalition, www.directdeposit.org or www.directpayment.org
Board of Governors of the Federal Reserve System, www.federalreserve.gov
Mid-America Payment Exchange, www.mpx.org
NACHA, www.nacha.org