The Pros and Cons of Direct Deposit

Written by , February 28, 2011

The Pros and Cons of Direct DepositDirect deposit has been an option for receiving paychecks and other funds for a few decades now. While there are still some employers that do not offer it, many require their employees to accept their pay this way. Those who receive funds from the government may also find that setting up direct deposit is mandatory.

Some people are hesitant to sign up for direct deposit because they do not understand it. And while it is generally a good thing for all parties involved, there are some minor disadvantages to consider. Here’s a summary of the pros and cons of direct deposit.

Here is some information and advice on the pros and cons of direct deposit:


  • You don’t have to worry about making it to the bank on payday. Depending on your work hours, getting your check there on time can be difficult. But with direct deposit, you can relax knowing that your money is already in your account.
  • There’s no chance of losing your check or having it stolen, since there is no paper check to begin with. By the same token, there are also no worries about your employer’s payroll department not printing or delivering the checks on time for payday.
  • Your funds will not be put on hold. Some banks put a hold on your funds when you deposit a check until it has had time to clear. But with direct deposit, you have access to your money as soon as it hits your account.
  • You usually have the option to have part of your check deposited into your checking account and part into savings. This makes saving money simple and painless.
  • Direct deposit saves employers money. That means there’s more money left over for raises and other benefits, and that’s good news for employees.
  • Cons

  • Changing banks can be a bit of a hassle. Changes to your direct deposit information usually take a couple of weeks to go into effect, so you might have to keep your old account open longer than you would otherwise to ensure that you get all of your deposits.
  • If you want cash when the bank is closed, you’ll have to go to the ATM and use your debit card to get it. In some cases, that means that you’ll have to pay a fee for each transaction. And those fees can really add up after a while.
  • Confusion over when you will receive your direct deposit could be costly. If you start writing checks or using your debit card before the deposit is made, you could incur NSF fees if there isn’t already enough in your account to cover them.
  • For most people, the convenience of direct deposit makes it a no-brainer. Just make sure that you understand the terms of the agreement and know when your deposit will be made, and you shouldn’t have any trouble. If you want cash, try to withdraw enough to tide you over until next payday, to save money on ATM fees. These simple measures will help you get the most out of direct deposit.

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