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Direct Deposit: What Is It And How Do I Set It Up?

Dan Miller4-minute read
February 24, 2021

Direct deposit is a popular method for receiving payroll checks, IRS refunds and unemployment benefits. It allows you to be paid directly into your bank account via electronic transfer, speeding up receipt of payment and eliminating inconvenience.

Benefits Of Direct Deposit

Setting up direct deposit has many benefits that can help simplify and increase the quality of your financial life. 

  • Eliminate inconvenience: Dealing with cash and paper checks can be fairly inconvenient. Setting up direct deposit can eliminate the inconvenience of having to go to the bank or a check-cashing company.
  • Help to waive checking account fees: Setting up direct deposit helps to keep your bank account balance more regular. That will help you to waive checking account fees and keep more of your hard-earned money.
  • Make your payments more secure: Filling out a direct deposit form will allow you to deposit your paycheck directly into your bank account. That is a much more secure system than dealing in cash or a paper check.
  • Eliminate resource waste: Because it's all handled electronically, electronic payments are also good for the environment.

How To Set Up Direct Deposit

In order to set up direct deposit, you will need to connect your company's payroll system with the information for your bank or credit union. There are two pieces of information that your HR department will need – your bank's routing number and your checking account number. Your checking account number is your specific account number. The bank's routing number is a 9-digit number that uniquely identifies your bank from all the other banks in the world.

The easiest way to find these two numbers is to use a voided check. Both your bank's routing number and your checking account number are found on the bottom of every check that you write. In fact, that is how check processing actually works – the routing and account information off the bottom of checks is processed by the bank's computer. If you don't have access to a check, then just call your bank. They'll be happy to give you the bank's routing number.

In some direct deposit situations, there may be an additional step for added security. The originating bank will make two small deposits (under a dollar each) into your checking or savings account. Then you need to verify the two amounts in order to prove that you are the owner of that account. This is not usually done for setting up a direct deposit with your employer or with the government, but is common when doing a bank to bank transfer.

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How To Avoid Problems With Direct Deposit

There are a few steps that you can take to avoid problems with direct deposit. You should check your savings or checking account balance on a regular basis. That way you'll be able to see when your deposits are processed. You'll also get a head start on noticing if there is a problem, which can save you a couple of days if you have to track down where your money is.

One advantage of direct deposit is that once it's set up, it's something that you can pretty much forget about. Usually, the only times when there are issues or complications is when you are setting it up the first time. After that, direct deposits are quite regular, which is one of their big advantages.

With that in mind, it's important to plan ahead if you decide to find a new bank account. You'll want to switch over your direct deposit. To switch over your direct deposit, contact your employer's payroll or HR department. They can provide you with the forms and instructions that you'll need to switch your direct deposit. Keep in mind that it can take one or two payroll cycles for the change to process. So you'll want to either keep access to your old bank account or switch to getting a paper check in the meantime.

Direct Deposit: FAQs

  • Is giving my employer my bank account number safe?
    • Remember that your routing and account number is on every check that you write. So while you want to exercise SOME caution with this information, it is not as secret as your Social Security number, for example.
  • What should I do if I did not receive a direct deposit payment from my employer?
    • If you haven't received a direct deposit payment from your employer, you should contact your company's HR department. They can help sort out the problem, and issue a paper check if needed.
  • Does direct deposit save my employer money?
    • Direct deposit does save your employer a small amount of money, since they don't have to pay to send out paper checks.
  • What should I do if I did not receive my unemployment direct deposit as expected?
    • If you don't receive your unemployment direct deposit when you expect it, you should contact your state unemployment office. They can help figure out what the problem is and correct it.
  • When can I expect my unemployment benefits to appear in my account if I use direct deposit?
    • Direct deposit is typically faster and more secure than paper checks, so if you use direct deposit, you'll usually get your unemployment benefits faster than if you opt for receiving a check.
  • How does direct deposit work for IRS refunds?
    • When filing your tax return, you have the option to receive any refund via a check or direct deposit. Things like the second stimulus payment are eligible to come in the same format that you choose to receive your tax refund.
  • How can I check to see if I received my IRS refund?
    • If you have signed up to receive your IRS refund via direct deposit, you can check your bank or credit union account statement to see when your refund is deposited to your checking account or savings account.

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Dan Miller

Dan Miller is a freelance writer and founder of, a site that helps families to travel for free/cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 kids.