Direct Deposit vs. Check: Pros and Cons for Your Employees

There are a variety of payment methods that employers can use to pay their employees—the two most common being direct deposit and paper checks. Before choosing which payment option to use for your business, it’s important to weigh the pros and cons of offering direct deposit vs. checks. 

We’ll cover the benefits and disadvantages of direct deposit vs. payroll checks and a third option that’s rising in popularity with employers: payout cards.

Direct deposit vs. payroll checks

Direct deposit is a method of electronic funds transfer. Many employers and employees prefer it over paper checks because of its simplicity—wages get deposited directly into the employees’ bank accounts.

Paper payroll checks, either printed or handwritten, are a popular way to pay unbanked and underbanked employees that don’t have a bank account.

Both methods of paying employees have pros and cons. Let’s break them down and dive into paying your employees with direct deposit vs. checks.

Paying employees with direct deposit: Pros and cons

First, let’s look at two pros of using direct deposit:

Pro: It’s fast.

Typically, using direct deposit is easy for employers to use and simple for their employees to access. Employees choose where they want their wages deposited and can access those funds immediately without making a trip to the bank. Employers can pay their employees anytime, anywhere using direct deposit, which saves time for both parties. Plus, your employees receive their payments quickly whether they’re at work that day or not.

Pro: It’s safe.

Unlike issuing paper checks, you don’t have to worry about paychecks getting misplaced or stolen. If your employee loses a paycheck, you’ll have to issue a new one and ensure that no one cashes the missing check. Direct deposit is a safe, secure payment method for everyone involved.

Next, let’s look at two cons of using direct deposit:

Con: There are fees.

Does direct deposit cost anything? Does direct deposit cost employers money? Yes—and it’s one of the biggest disadvantages of this payment method. Deposit fees vary between financial institutions, but they’re always there. Not only will your business have to pay fees to set up direct deposit initially, but you may also be responsible for transaction fees each time you deposit money into an employee’s account.

Con: It’s time sensitive.

No employee wants to receive their paycheck late. Employers have to stay on top of time and attendance records and ensure they run payroll on time, or the direct deposit won’t be ready on payday. In these cases, the employer must expedite their payroll to pay their employees on time, resulting in even more fees. 

Paying employees with paper checks: Pros and cons

Now, let’s examine two pros of paying employees with paper checks:

Pro: They offer employees more control.

Some employees prefer not to use a bank, and offering paper checks is one of the few ways to pay them. Checks offer them more control and privacy over their funds and give them the choice of where and when to cash them. They also have the opportunity to deposit their checks into a bank account later on if they choose to do so.

Pro: They can save employees money.

Not all bank accounts are free, and giving your employees the option to receive a paper paycheck caters to those who would rather simply cash their checks. This is an advantage for new employees who may not have the means to open their own accounts.

Finally, here are two cons of paying employees with paper checks:

Con: They’re easy to lose.

Paper payroll checks can (and will) get lost or stolen. When this happens, both the employer and employee are left at a disadvantage—employers have to spend the time and resources to replace the check, and employees will have to wait longer to receive their wages.

Con: They’re costly for the employer.

Paying multiple employees with paper checks means spending more on supplies, like check stock paper and specialized printers and ink. For businesses that write paper checks by hand, it means expending precious time and resources each pay period that could be spent elsewhere.

A third option: Payout cards

So, is a paycheck or direct deposit the best choice for your business? When it comes to direct deposit vs. checks, they both have their pros and cons, but there’s a third option that many businesses are considering: payout cards.

While direct deposit is a great option for many employees, there will always be ones who prefer not to use a bank for one reason or another. Payout cards offer significant benefits for both employers and their unbanked or underbanked employees. 

For employers, you save the time and money associated with issuing paper checks and no longer have to worry about lost, misplaced, or stolen checks.

As for employees, they get their pay instantly loaded onto their cards. And with Juice payout cards, they can access their money up to two early, or even sooner with employer participation.

Sign up for your free demo of Juice for Business payout cards—see how we’re making it easier to pay your employees.

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