There's a very short list of things that really haven't changed in the past 50 years: apple pie, your fourth-grade teacher's fashion sense, and paper checks. Despite the advances that have been made in financial technology, paper checks are really about the same instruments they've always been. In a digital world, they're increasingly expensive, cumbersome, and insecure.
Most employers offer an all-electronic system for paying their employees, and at the center of that system is direct deposit. Direct deposit transmits your paycheck from your employer's business account directly into your checking, savings, or prepaid account(s).
You'll still get a pay stub, or an electronic equivalent, from your employer that lists the transfer amount along with any deductions, like taxes, health care, or retirement. What you won't have to do is hold on to that check until you can find time to get to an ATM or branch. Payroll deposits clear instantaneously, which means the money is generally available in your account the same day.
Let's look at three reasons why direct deposit may be right for you.
Think like a fraudster for a second. A paycheck is the largest check most people see on a regular basis. If it's lost or stolen, it could easily be cashed.
While the signature requirement is some protection, many check-cashing establishments don't look closely for a match. It's remarkably easy to cash a stolen check and the law provides little protection. Your employer might be sympathetic, but they're probably not willing to issue you a second paycheck. The burden would be on you to prove the theft before you could get your salary.
With direct deposit, those concerns are virtually nonexistent. There are no paper checks to keep safe. There's no concern that someone else will accidentally receive your check. The whole transaction is handled seamlessly by computer.
Believe it or not, the payroll process is incredibly complicated for companies. Many of them hire outside firms at great expense to ensure they're accurately paying their employees in compliance with various state and federal regulations. One of the costs involved in payroll production is check printing. Paper checks must be printed, signed, and recorded, all of which requires labor.
The cost of writing, verifying, and safeguarding a paper check is about $1 per employee, per pay period, assuming no lost checks or pay disputes. The lost time to distribute and deposit those checks is about $2 per employee. As such, it costs businesses about $3 per person to print and distribute paper checks. Direct deposit costs about half as much.
These savings may seem insignificant, but they add up quickly. Your employer spending less money on payroll means more money to pay you. Whether those cost savings result in a lower-priced product, more investment in the business, or higher wages, you benefit. When your employer comes out ahead, so do you.
Obviously, direct deposit saves you an errand every pay period. The stress making it to an ATM or branch before closing time on payday is considerable. There's also no need to worry if you got your paycheck deposited in time for same-day processing. Say goodbye to deposit availability guessing games.
Beyond the obvious conveniences, direct deposit opens up a slew of other possibilities. You can more easily automate your savings by depositing a portion of each payroll into a savings account and the rest into your checking. You can pay bills more easily online since you get confirmation your funds are available. You may also be able to secure lower fees or a higher interest rate on your checking account!
Paperless payroll saves trees, it saves time, and it saves frustration. It does all of this while being safer, faster, and more secure.