A deposit account is a bank account maintained by a financial institution in which a customer can deposit and withdraw money.Deposit accounts can be savings accounts, current accounts or any of several other types of accounts explained below. An account established for one person by an agent, nominee, guardian, custodian, or conservator, including Uniform Transfers to Minors Act accounts, escrow accounts and brokered deposit accounts An account held in the name of a business that is a sole proprietorship (for example, a 'Doing Business As' or DBA account). Apr 28, 2020 Types of Demand Deposit Accounts As of Sept. 16, 2019, the total amount of demand deposit accounts in the U.S. Was $1.42 trillion. This compares to $1.1 trillion five years ago and $395 billion 10. Deposit accounts (unlike CURRENT ACCOUNTS, which are used to finance day-to-day transactions) are mainly held as a form of personal and corporate SAVING and used to finance irregular ‘one-off payments.
A savings deposit account is a type of bank account in which a person can deposit his or her money and have it earn interest. The savings deposit account is usually limited in several ways, including how many times a person can make transactions from the account, or in some cases how many times a person can make a deposit into the account per month. Banks, credit unions, and other financial institutions can offer a savings deposit account to their customers, and unlike a checking account, the process of depositing or withdrawing money from the savings account can be more involved and often necessitates a trip to the bank or credit union.
The amount of interest one can earn on a savings deposit account varies from institution to institution. Some institutions offer more interest as the monetary amount of the savings account rises. Conversely, some banks or credit unions will charge a fee if the dollar amount of the account falls below a certain point. Still other accounts can earn higher interest through promotions run by the financial institution or by opening more than one account. Many banks now allow two accounts to be linked — a checking and a savings account, for example — and the funds in one account can cover overdrafts of the other account.
Opening a savings deposit account is usually quite easy. A visit to the bank or credit union is often all it takes, and a bank associate will help the customer decide which deposit account is best for him or her. Children under the age of 18 often need an adult to open the account for them, as well as to make transactions such as deposits and withdrawals. Most banking institutions require some form of identification in order to open the account. The customer will then make his or her first deposit into the account and receive an account number in return. This account number will allow the customer to access the account at any time.
Many institutions only require a small monetary deposit to open the account. The customer can then add funds to the savings deposit account at any time. The more money that goes into the account, the more interest the account will earn. Some institutions require the amount of money in the account to be over a certain amount for the account to stay active, so a potential customer should inquire about the specific requirements before opening the account.
In years past, getting paid meant receiving a physical check from your employer that you would then bring to a bank in order to cash or deposit into your checking or savings account. Often, this meant spending your lunch break on pay day waiting in line at the bank, or else waiting until the weekend to access your money.
Today, there are more convenient options for getting paid. According to the National Automated Clearing House Association (NACHA), more than 80 percent of workers in the United States now get their pay by direct deposit.
We define exactly what direct deposit is, how it works, and how direct deposit accounts differ from other kinds of bank accounts.
What is direct deposit?
Direct deposit is a form of payment wherein funds are electronically transferred into your savings or checking account, in lieu of a paper check. Though direct deposit is most commonly leveraged by employers paying their employees, it can also be leveraged for other purposes: for example, when receiving a tax refund, Social Security or disability benefits, or other types of payments. Direct deposit ultimately relies on the infrastructure of the Automated Clearing House (ACH) network, which gives banks an easy means of transferring money electronically.
A direct deposit account is simply a checking or savings account which offers the ability to send and receive funds electronically. Most checking and savings accounts available through commercial banks now come with direct deposit capabilities by default.
How does direct deposit work?
As mentioned above, direct deposit in the United States works by utilizing the Automated Clearing House (ACH) network. This is an electronic system that allows banks and other institutions to electronically transfer funds. It is run, governed, and administered by the National Automated Clearing House Association (known as Nacha), a non-profit funded by the financial institutions that use its network. In 2018, the ACH facilitated and processed nearly 23 billion financial transactions, worth approximately $51.2 trillion.
The ACH uses two numbers—your bank’s routing number and your personal bank account number—to know precisely where money should be deposited or withdrawn from.
How to sign up for direct deposit
Whether it’s to receive your weekly pay, a tax refund, Social Security benefits or any other payment, signing up for direct deposit through ACH is typically pretty straightforward. It requires that you fill out a single form providing the following information:
The account number of the bank account you want funds deposited into (most commonly a checking or savings account)
Your bank’s routing number
Your bank’s physical address
A voided check or deposit slip (used to verify your account and routing numbers)
You may sometimes also be asked to supply your Social Security number, mailing address, or other information, but this will vary from employer to employer.
You can find your routing number and account number on your check, or by logging into your bank account online.
As an employee, you’ll likely be given the opportunity to opt into direct deposit during the onboarding process when you are hired. If at any point you would like to change your direct deposit so that it is deposited into another bank, or stop it altogether in lieu of paper checks, you can do so by requesting that change through your employer, usually by speaking with the accounting or human resources department.
Depending on the options offered by your employer, you may also be able to access split deposits, which allow you to divide your direct deposit between multiple accounts—such as a checking and a savings account—instead of a single account. This can help some individuals reach their savings goals by automating savings.
After you have submitted your direct deposit request form, it can be wise to ask your employer how long it takes for direct deposit to begin. It’s usually between one and two payment cycles to set up direct deposit, during which time you may need to rely upon paper checks.
Once you have successfully set up direct deposit, you will no longer receive paper checks. Instead, funds will be deposited directly into the designated account(s). When these funds are deposited will depend on your employer and when transactions are posted, but it typically coincides with a regularly scheduled payday.
The benefits of direct deposit
People choose to sign up for direct deposit for a number of reasons. The most common of these include
Convenience
Direct deposit removes the need to make a trip to the bank and deposit a physical check in person. In addition to everyday convenience, this makes getting paid easier during times when you may be traveling or are otherwise too busy to visit a bank.
Faster access to funds
Because direct deposit means that funds are deposited into your bank account immediately, it is possible to access them as soon as they are in your account. This can be particularly beneficial for one-time payments, such as receiving a tax refund check or other form of payment. A physical check may take anywhere from 7 to 10 business days to reach you by mail.
Increased security
Because a physical check is never exchanged, there are fewer opportunities for the check to be lost, stolen, or altered.
Paperless
Electronic deposits mean fewer paper checks being printed and ultimately ending up shredded in landfills, which is better for the environment.
Low cost
Sending a direct deposit payment via ACH is inexpensive for employers, and typically free for employees. That means you’re not paying for the added convenience that direct deposit offers.
Potential for other savings
Many banks charge their checking customers a monthly fee to have a checking account—often to the tune of $6 to $15 per month. But often they’ll waive these fees for individuals who enable direct deposit into their checking account, which can lead to significant savings. Saving $15 per month would add up to $180 per year.
Automated savings
For individuals leveraging split deposits, direct deposit can make it easier than ever to automate savings and reach your financial goals by divvying funds between multiple accounts.
In most cases, signing up for direct deposit is an incredibly easy and straightforward process. It’s convenient, it often allows you to access your money faster compared to paper checks, and it can even save you money. If you’re interested in signing up for direct deposit, speak to a member of your human resources or accounting department for details specific to your employer.
Investing involves risk including loss of principal. This article contains the current opinions of the author, but not necessarily those of Acorns. Such opinions are subject to change without notice. This article has been distributed for educational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.