When you land a job, you must decide how you want to get paid. You might have the option to choose between direct deposit and paper check. An April 2018 article published by Paychex, a payroll and human resources solutions company, says more than 82 percent of U.S. employees are paid by direct deposit. Still, some employees prefer paper checks. Both options have their pros and cons.
Pros of Direct Deposit
Direct deposit is safe, so you don't have to worry about stolen, damaged or lost checks. The GTE Financial website says the Social Security Administration has never lost a payment by direct deposit since 1976, when it first started using the system. With direct deposit, you don't have to make trips to the bank to cash your check. If payday falls on a holiday or weekend, you may get your money early, on the prior business day. If you're off work on payday, you can still access your pay. Your money may be in your account on payday morning, regardless of what time your employer hands out paychecks. Direct deposit lets you make split deposits into multiple bank accounts to separate your savings from bill payments.
Downsides of Direct Deposit
You must give your employer your bank account information to receive direct deposit. If you don't qualify for a bank account, you can't get direct deposit. Some employers offer payment by payroll card to employees who can't get an account, but these often have fees attached. Another disadvantage of direct deposit is the possibility of getting slapped with bank charges if you fail to manage your funds properly.
Upsides of Paper Checks
Paper checks allow you to keep your bank account information private from your employer. With your paycheck in your hand, you have control over when your money is available to you. If you don't have a bank account, you never have to worry about getting hit with bank fees. If you don't want your spouse knowing how much you are earning, paper checks can help conceal that information. For example, if you have a joint account for direct deposit, the other account holder can see deposited amounts. Your paper check, however, is handed to you alone.
Cons of Paper Checks
Paper checks are susceptible to theft, loss and damage. Depending on the situation, your employer can charge you for having to replace a paper check. On a holiday or weekend, you may have to wait until the next business day to cash your check. If you are out sick or on vacation, you probably won't get your paycheck until you return to work. You have to make trips to the bank to cash or deposit your check, which results in lost time and money.
Differences by State
Whether your employer can force you to accept direct deposit depends on state law. The state might allow it if you get to pick your own financial institution or your employer offers an alternative payment method, such as cash or paper check. In some states, employers must get employees' approval to use direct deposit. Paper check is an acceptable method of payment regardless of where an employer is located, as long as it can be converted to cash.
- GTE Financial: Direct Deposit
- Paychex: Benefits of Direct Deposit to Employers and Employees
- Consumers Union: Payroll Cards: Issues for Employers
- Patriot Software: Advantages of Employee Direct Deposit
- Ready Funds: Why Some Employees Continue to Request Paper Checks, and What You Can Do About It
- HR.BLR.com: Can Employers Make Direct Deposit Mandatory?
- Legal Aid Society Employment Law Center: Paydays/Late Pay/Bounced Paychecks
- National Automated Clearing House Association. "What Is ACH?" Accessed Feb. 8, 2020.
- National Automated Clearing House Association. "ACH Network Volume Statistics." Accessed Feb. 8, 2020.
- Social Security Administration. "Social Security Direct Deposit." Accessed Feb. 8, 2020.
- Consumer Financial Protection Bureau. "Should I Enroll in Direct Deposit?" Accessed Feb. 8, 2020.
- Chime. "6 Reasons Direct Deposit Is the Best Way to Get Paid." Accessed Feb. 8, 2020.
- National Credit Union Administration. "Understanding a Check and Balancing a Checkbook." Accessed Feb. 8, 2020.
- Citizens Bank. "How to Set Up Direct Deposit." Accessed Feb. 8, 2020.
- Consumer Financial Protection Bureau. "I Get My Paycheck by Direct Deposit. When Can I Withdraw the Funds?" Accessed Feb. 8, 2020.
- Commonwealth of Massachusetts. "Learn About Your Options for Receiving Your Child Support Payment." Accessed Feb. 8, 2020.
- Office of the Attorney General of Texas. "Direct Deposit." Accessed Feb. 8, 2020.
- Internal Revenue Service. "Get Your Refund Faster: Tell IRS to Direct Deposit Your Refund to One, Two, or Three Accounts." Accessed Feb. 8, 2020.
- Internal Revenue Service. "Form 1040." Accessed Feb. 8, 2020.
- Internal Revenue Service. "Form 8888." Accessed Feb. 8, 2020.
- Consumer Financial Protection Bureau. "How Do Automatic Debit Payments From My Bank Account Work?" Accessed Feb. 8, 2020.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.