Gone are the days of having to wait in line at the bank to cash your paycheque. Instead, direct deposit lets you automatically receive funds straight into your personal bank account. It’s no wonder that direct deposit has become the favoured payment method for getting your paycheque.
But did you know you can also have funds deposited directly by the Canada Revenue Agency? As we’ll show, setting up direct deposit is simple as long as you have the required information. And after that initial setup, direct deposit works like a charm, so let’s begin.
Key Takeaways
- Direct deposit is a method of automatically sending and receiving electronic payments.
- Direct deposits are commonly used by employers paying their employees, government agencies issuing benefit payments, and financial institutions paying out dividends.
- To set it up, you'll need to fill out a direct deposit form and attach a void cheque or deposit slip.
- A direct deposit form will require your full name, address, SIN, and various pieces of personal banking information.
Where is direct deposit offered?
Including workplaces, here's a look at where direct deposits are typically offered and what kind of payments are used for:
- Workplaces: Providing payroll/paycheques
- Federal and provincial governments: Making benefit payments
- CRA: Issuing tax refunds
- Banks and financial institutions: Paying out dividends
- Property management companies/landlords: Receiving rental income
- Independent contractors: Receiving payments from contracted employees
- Individuals: Making/receiving child support payments
How does direct deposit work?
The process of creating and sending a direct deposit usually follows these steps:
- Employer asks for specific banking information: This is typically done when you're first hired and filling out the forms and paperwork required during your training or onboarding period.
- Employer sends instructions to the bank: These payroll instructions are related to Payments Canada – a nonprofit organization that oversees the clearing and settling of payments between banking institutions.
- Employer sends further instructions to their bank: A few days before payday, payment amounts and details are sent from the employer to their bank, from the bank to Payments Canada, and finally from Payments Canada to the employee's bank.
- Employee's bank receives payment instructions: The payment is processed and the employee's paycheque appears in their account.
Are there any fees associated with direct deposits?
Individuals don't have to worry about paying fees to receive direct deposits, but employers pay fees to use this payment system.
There's a one-time fee involved when the company first sets up a direct deposit with a specific bank, and a payroll processing fee is charged for each transaction that takes place. These fees vary, depending on which bank is being used and the nature of its relationship with the company in question.
How to set up direct deposit
Setting things up to receive direct deposits is pretty simple and only requires a few steps:
- Fill out the direct deposit form: Your employer will provide you with a form that asks for your personal banking details. All you need to do is fill in the required information, which can usually be found through your online banking portal.
- Attach a void check or deposit slip: If you have cheques on hand, it's easy to get a void cheque and attach it to your direct deposit form. But if you don't have a cheque or prefer not to use one, you can get a deposit slip from your bank. These days, you can often get them online, so a trip to the branch isn't even necessary.
- Submit the form: Pass the form and paperwork back to your employer, and they will take care of the rest.
Direct deposit forms by bank
If you'd like to use a bank form instead of a voided personal cheque, these are links to the direct deposit forms from some of Canada's most popular banks:
| Bank name | Direct deposit form link |
|---|---|
| BMO | Direct deposit notification |
| CIBC | Set up direct deposits |
| RBC | Set up Direct Deposit |
| Scotiabank | Direct deposit |
| TD | How to access the direct deposit form on EasyWeb |
| EQ Bank | EQ Bank FAQ |
| Tangerine | How do I set up my payroll direct deposits |
| Alterna Bank | Resource Centre: Forms |
| Simplii Financial | Direct Deposit |
How to set up direct deposit for government benefits
Setting up a direct deposit to receive your government benefits means following steps similar to those listed above, but you may also be required to provide information from your recent tax return(s). You can find more information about this on the Direct Deposit - Canada Revenue Agency webpage.
Required information to fill out a direct deposit form
Whether using a paper or electronic form, this is the information you'll need to provide when setting up direct deposit:
- Full name
- Home address
- Social Insurance Number (SIN)
- Bank name
- Bank transit number
- Bank institution number
- Bank account number
You'll also need to provide one of the following items:
- A void cheque
- A direct deposit slip from your bank
How long do direct deposits take?
While it can take a few weeks for the initial direct deposit process to be set up for a new employee, once it's been implemented, it'll typically take 1 to 3 days for the deposit to clear. Many banks deposit the funds at midnight on the assigned payday, but this can vary.
Employers usually set things up in advance so deposits clear immediately on payday.
If payday falls on a weekend or holiday, the payments are typically made on the preceding Friday.
Is direct deposit safe?
Using direct deposit to have your paycheque, benefits, or other payments sent directly to your bank account is one of the safest payment methods.
A physical cheque can be lost, stolen, or damaged, and getting a replacement can be difficult, expensive, and time-consuming.
But money that's automatically transferred from one account to another can't be lost or stolen. Sure, glitches can happen and the payment may be delayed, or your employer could input the wrong amount. But these are errors, not safety concerns.
As mentioned, direct deposits are managed by Payments Canada, but it does more than just manage these deposits. It has a much larger mandate as set out in the Canadian Payments Act, which includes:
- Establishing and operating national systems for clearing and settling payments
- Facilitating the interaction between its systems and other systems involved in clearing and settling payments
- Facilitating the development of new payment methods and technologies.
Can the sender see my banking info?
The information you provide to your employer, the CRA, or whoever is providing your direct deposit is protected under the Privacy Act. This means that they can't access your personal banking information, so they can't monitor your account, remove funds, or any such activity. Since you've only given authorization for them to deposit money, that's all they can do.
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What happens if you change bank accounts?
If you decide to switch to another bank or simply open another bank account, you'll need to contact your employer's payroll department and update your information for direct deposits.
Sometimes, such as when a bank merger or closure occurs, your financial institution may contact your payors and inform them of the changes. You should still reach out to the payroll department to ensure the necessary updates have been made and you don't miss any payments.
The pros and cons of direct deposits
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FAQ
What is a direct deposit?
Direct deposit is a streamlined method of payment where money, like paycheques, refunds, and tax returns, is automatically deposited directly into a person’s bank account. With direct deposit, paycheques are sent on a regular schedule.
Why did I get $600 from Deposit Canada?
If you see “Deposit Canada” on a direct deposit, it means the Government of Canada has refunded you money, possibly for a tax refund or federal or provincial benefits that you’re eligible for.
What time does a direct deposit hit?
Many employers try to set up direct deposit payments so the payment actually hits their employees’ bank accounts on their designated payment date. Many banks deposit the funds at midnight on the assigned payday.
How do I direct deposit to someone?
If you’re not setting up a regular automatic payment like a paycheque, but want to send money directly to someone, you’ll want to use a method like a wire transfer or an Interac e-Transfer.
How do I get a direct deposit form?
Look for the form on your bank’s web page or head to a local branch and ask for one. You can complete the form online or in person, just be aware that you will also need to provide a voided cheque.
Does the CRA do direct deposit?
Yes, it’s actually the quickest and easiest way to get your income tax refunds and benefits. Plus, CRA tells you the exact date you can expect your direct deposit to hit your bank account.
How do Canada's seniors get direct deposits in 2025?
Canadians aged 75 and older who meet the income requirements can receive their Old Age Security pension by direct deposit. Follow the link on the government website to set up your payment.
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