A direct deposit is an electronic fund transfer into a bank account made by a payer to a payee. Essentially, the transfer is made directly between banks through a network and does not include paper or physical checks. This makes the crediting process very fast, and it usually does not take long for a direct deposit to clear. That said, for this transaction to go through, the payer must authorize it through a direct deposit authorization form. Here is what you need to know about this document.
What Is a Direct Deposit Authorization Form?
A direct deposit authorization form is a formal document that allows a third party, usually an employer looking to fulfill payroll, to transfer funds directly into your bank account. You will typically need to attach a voided check to the form to help the employer confirm the account’s validity. Once you complete the document and send it to your employer, they can send payments directly to your account, whether they are disability benefits, wages, salaries, or subsidies. A direct deposit authorization form is also called a:
- Payroll Direct Deposit Form
- Employee Direct Deposit Authorization Form
- Employee Direct Deposit Form
Previously, employers had to print, fill in, and hand out physical checks on payday to employees, who would then have to deposit them into their accounts. Advancements in technology have made it possible for employers, with their employee’s permission, to digitally transfer funds directly into employee accounts. Most companies have a standardized direct deposit authorization form that they use to complete a direct deposit. In the form, you, the employee, provide your bank details and give your employer authorization to send you money.
Direct Deposit Authorization Forms
Elements of a Direct Deposit Authorization Form
A direct deposit authorization form should contain details that make it possible for the payer to transfer funds to the payee’s account and for the payee to identify the payer. Consequently, it should contain the following crucial information:
- The name and address of your bank
- The name of the individual or company you (the payee) are authorizing to make deposits to your bank account.
- Your account number and type (savings or checking)
- Your bank’s 9-digit routing number
- Any other relevant details about your bank
- The date
- The percentage you want deposited into your account
- Your official signature and name
- Date of the form
How to Fill out a Direct Deposit Form
There are different types of direct deposit forms depending on the bank that manages your account. Nonetheless, most forms contain similar elements and can be filled through the following process:
- Step 1 – Open the direct deposit form and enter your name – as it appears on your account – and current address.
- Step 2 – On the first line, enter the name of your bank, followed by your account number, in the required field. Enter your bank’s routing number in the corresponding field. Usually, you can find it at the bottom of your personal check.
- Step 3 – Choose the type of account – checking or savings – that you would like to make the direct deposit to in the corresponding box. You will need to attach a deposit slip or voided check for the account linked to the transfer.
- Step 4 – Enter the company name for the business entity you are allowing to make deposits to your account in the field labeled “Company Name.”
- Step 5 – Next to the field labeled “Employee’s Signature,” sign and date the form.
- Step 6 – Review the form to make sure you have entered all the information correctly. If you are satisfied with the document, submit it to the HR or Employer’s Payroll department in your firm.
Yes. Direct deposit authorization forms are crucial to the process of completing a direct deposit. In addition to helping employers efficiently manage their payrolls, they also protect them from the legal ramifications of handling employee bank information without authorization from the employee. They allow employees to receive their payments fast.
You can usually download a direct deposit authorization form from your bank’s official website or receive one from your employer upon hire. Alternatively, you can download one from our collection of forms and use this guide to complete it.
Yes. But it is easier to use an official one offered by your bank or employer for a more streamlined process. Most banks feature a link on their website that allows you to set up a direct deposit by customizing your own form. When you click on this link, it will direct you to a direct deposit form that you can fill in and save. Also, most companies offer a standardized authorization form.
A business or employer can set up a direct deposit if they have their employer identification number (EIN), voided check, financial statements, and a completed authorization form.
While direct deposits are performed through banks, the bank does not need to authorize the transfer. You do not need a signature or any other form of approval. All you need is both account numbers (payer and payee) and the bank routing number, which you should find at the bottom of your checks.
As mentioned earlier, direct deposits are made electronically from bank to bank, which makes the process faster than using paper checks. You can expect the clearing process to take no more than one to three business days. However, it can sometimes take up to five days for the money to reflect in the payee’s account, depending on the payer.
As you can see, completing a direct deposit is a fairly simple process as long as you have a duly filled direct deposit authorization form. It is also a very fast and efficient way of paying employees on a payroll. The authorization form should identify the payee and contain crucial details, such as the deposit amount. You may also need to submit a deposit slip (savings account) or voided check (checking account) to ensure the validity of the account.