Whether it’s your weekly or bi-weekly paycheck or depositing money into someone else’s bank account, gone are the days of paper checks. ACH transfers and direct deposits are becoming increasingly popular for good reason. ACH and direct deposits are convenient, and you don’t even need to go to a brick-and-mortar bank to complete these transactions. What’s the difference between an ACH transfer and a direct deposit? Glad you asked.
What is ACH?
ACH transfers are a popular type of electronic transfer that is processed by the Automated Clearing House (ACH) Network. They are a safe and reliable way to move money between different bank accounts and financial institutions. ACH transfers take about two to five business days to deposit and usually free of charge.
ACH transfers work best with small, frequent deposits. You may be receiving or sending money via ACH transfers and not even know it. Some common types of ACH transfers include paying bills online, automatic contributions to a savings account, IRS deposits and government benefits.
What is Direct Deposit?
Direct deposits are an electronic payment method that uses the ACH network to move money between banks. In other words, direct deposits are one type of ACH transfer. Direct deposits are commonly used to replace traditional cash and checks because of their safety and their convenience.
For example, the Social Security Administration often uses direct deposits to deposit government benefits instead of mailing out checks. Many employers will also use direct deposits instead of paying their employees in cash or with checks. This convenience can be felt on both an employee and employer level.
If your employer pays you through direct deposits, have you considered ways to get paid up earlier than your scheduled payday?? With an online RoarMoney℠ account from MoneyLion, you can get paid up to two days earlier* just by linking up your direct deposits. Getting paid earlier can make a huge difference if you’re tight on cash.
Convenience of Direct Deposits
Direct deposits are becoming increasingly popular. As an employee, when you receive your money via direct deposit, you no longer need to go to the bank to deposit your paycheck. This couldsave you time and energy each payday.
As an employer, direct deposits are typically more cost effective. Physical checks need to be mailed to each employee, whereas a direct deposit is just automatically deposited into their accounts.
Not only is direct deposit a more cost-effective route to take, but it’s also significantly better for the environment. A check has a singular purpose and is often thrown out once deposited. The envelope the check came in is discarded shortly after opening. The amount of natural resources used each year on paper checks is staggering.
Similarities Between ACH and Direct Deposit
ACH transfers and direct deposits both use the ACH network to facilitate transactions. In fact, direct deposits are one of the many different forms of ACH transfers. Both direct deposits and ACH transfers are typically secure ways of transferring money — especially when you compare a direct deposit or ACH transfer to a regular paper check or cash, which can be easily lost, damaged, stolen or forged.
Another similarity between ACH transfers and direct deposits is that a direct deposit or ACH transfer is typically free. You also don’t need to worry about paying for postage to mail someone a check, as direct deposits and ACH transfers are done electronically.
Difference Between ACH and Direct Deposit
Even though direct deposits are one form of ACH transfers, ACH transfers cover a wider range of transactions that direct deposits do not cover. For example, many banks offer mobile apps. Many of these mobile apps have technology where you can take a photograph of a physical check and deposit it directly into one of your bank accounts. This transaction would be considered an ACH transfer.
How to Get the Cash You Need Quickly
Get paid up to two days early* when you set up direct deposit into a RoarMoney account. That means money is in your pocket to pay off bills or go out for a fun night sooner.
All you need to do is download the MoneyLion app, register, open a RoarMoney account and connect your direct deposits.You can also link your existing bank account in the app and get funds today with MoneyLion InstacashSM cash advance. With Instacash you can get up to $500, 0% APR cash advances based on your recurring direct deposits of paychecks or other income that you have not yet received.
Is there a difference between ACH and direct deposit?
Yes, there is a difference between a direct deposit and ACH. ACH transfers are bank-to-bank transfers, whereas direct deposits are transfers directly into your account, which is typically your paycheck.
What is considered a direct deposit?
A direct deposit is when money is automatically deposited into your bank account instead of receiving a paper check to deposit money.
Are ACH and direct deposit the same?
A direct deposit is made possible through the ACH network, but a direct deposit is not the same as a standard ACH transfer.
Written by Jeannine Mancini Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies and a Master of Arts in Career and Technical Education from the University of Central Florida.
