Forum: money.stackexchange.com
Tags: <income><deposits><paycheck>
Title: What, if any, are the downsides of direct deposit?
Question: After many years, my employer is offering direct deposit.  I've used direct deposit before at other jobs.  Are there any downsides or cons to using direct deposit?

Answers:
sents: text: The only problem, besides having to update your information if you change banks, has been an unintended issue.
text: I have noticed that people don't look at their pay stub when getting direct deposit.
text: The stub is frequently only available on a third party site.
text: The harder it is to see, the less often it is checked.
text: I have run into instances of coworkers who didn't notice that the 401K amount was wrong; or that dental insurance wasn't being withheld; or taxes were being sent to the wrong state.
text: The error went on for months or years before they noticed.
text: You have to be proactive to make sure that the items are correct.
answer_details: author: money.stackexchange.com/users/5414/mhoran_psprep
score: 33
sents: text: The only downside I can think of is if you change banks (or change accounts), you need to remember to notify your employer.
answer_details: author: money.stackexchange.com/users/25370/Kent A.
score: 14
sents: text: I've seen an issue once before where my employer's payment authority (a 3rd party provider who managed the direct deposits and paystubs) issued double-payment.
text: This appeared on my bank statement as two deposits followed by a withdrawal, all for the same amount.
text: I can't imagine this being (ab)used for a truly nefarious purpose, but it does prove that your employer or the payroll provider has the authority to withdraw as well as deposit funds.
text: If your funds are legitimately stolen, I would imagine your bank or the FDIC would have you covered.
text: This could get you into some trouble, however, if you are in a paycheck-to-paycheck situation and get into a wage dispute with your employer (or various governments, unions or anyone who has legal authority on your wages).
text: Perhaps they discover you've been overpaid, or they were collecting an improper amount of tax, etc.
text: If they decide to 'help' you by automatically 'correcting' the problem and withdrawing funds from your account, you could be caught unawares and get stuck with some overdrafts, even if you resolve the underlying dispute in your favor and get your funds back.
text: This boils down to how much you trust your employer, their payroll contractor, your bank and your government.
text: I view direct deposit as a convenience that will save me days of time over my professional career.
text: Weighed against what I assume is a very low risk, I would not give up direct deposit without clear evidence of malfeasance by one of the parties I mentioned above.
text: (I am not a lawyer and this is not legal advice, or even necessarily plausible in reality.
text: I just thought it worth pointing out.)
answer_details: author: money.stackexchange.com/users/14555/Dacio
score: 5
sents: text: Direct deposit is a two-way street.
text: If your employer is able to deposit money directly into your account, it is also possible for them to withdraw money from your account.
text: Errors with this happen every so often .
answer_details: author: money.stackexchange.com/users/19238/Compro01
score: 4
sents: text: It does provide a paper trail of where you deposit your money.
text: If your wages are garnished or you get into some other form of legal trouble, this means that anyone who contacts your employer can directly freeze your accounts or set them to funnel into child support or the like.
text: It also means that various people at your company will have your banking information, creating an additional source of vulnerability for loss and exploitation of financial information.
text: That said, neither of those are really major issues.
text: The odds are that the government already knows where you bank or can get that information easily.
text: And you probably already have so many places where your financial data is available that a presumably secure records vault is the least of your worries.
text: Additional potential problems:
text: As has been mentioned in previous answers, you'll have to update your information with your employer when you change jobs.
text: Confusion over when your direct deposit goes into your account (sometimes complicated by differences between your company handing you your paystub and when the deposit clears) could lead to overdrafts.
text: Having a check in-hand makes it clear when you get your money.
answer_details: author: money.stackexchange.com/users/14106/Sean Duggan
score: 2
sents: text: By providing your employer with your account information, your employer can later withdraw an amount it feels it paid in error.
text: While you may ultimately win the battle, "possession is 9/10ths of the law."
answer_details: author: money.stackexchange.com/users/26097/Perry Capitani
score: 2

Summary of the answers:
It provides a paper trail of where you deposit your money. If you change banks, you need to notify your employer. Various people at your company will have your banking information. In case of legal trouble, your accounts can be frozen.
Some people feel that by providing their employer with their account information, their employer may be able to later withdraw money it feels it paid in error. It also means that various people at your company will have your banking information, which makes some people feel vulnerable. In addition, confusion as to when the direct deposit goes into your account and is cleared, could result in the use of an overdraft. If you end up in legal trouble, your employer can be asked to directly freeze your accounts or funnel them money e.g. into child support. On the other hand, direct deposit is a convenience that can save a lot of time. It does provide a paper trail of where you deposit your money. One of the few downsides is that if you change banks or accounts, you need to remember to inform your employer.