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Automatic deposit of wages or benefits (such as Social Security payments) into a consumer's bank account. Direct deposit payments are processed through the Federal Reserve's Automated Clearing House. Since January 1, 1999, all federal payments, including Social Security payments to newly enrolled beneficiaries, are made by electronic direct deposit to the recipient's bank account, as required by the Debt Collection Improvement Act of 1996. Direct deposit payment remains optional for previously enrolled beneficiaries.

Electronic funds that are deposited directly into your bank account rather than through a paper check. Common uses of a direct deposit include income tax refunds and pay checks.

Investopedia Says:
As a whole, direct deposit is the most popular form of payment as it eliminates the risk of losing a check and eliminates the need to physically visit a bank to make a deposit.

Direct deposit allows an employee's pay to be immediately available in their accounts at midnight the day before pay day and it is not subject to a check clearing wait period. Salaries paid via check can take a week or more to clear within their account.

Direct deposits are also popular for income tax refunds, as it is the fastest method of payment.

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