For those who earn an income, there are several ways a person could be paid. Often an employer will provide options or a specific method for receiving income. The following are some examples of the various methods and the pros and cons of each.

Cash

Cash is the most direct option in which a person receives the money directly. Being paid in cash is a form of income, and though it is not widely used because it is hard for employers to track, it is the most direct form of payment for services.

Pros:

• It’s instantly available to use as desired.
• It is a widely accepted form of payment used in most transactions.
• Cash may be the best way to avoid debt since it’s impossible to spend more money than you are given.
• In some situations, a cash payment could be put onto a prepaid card that works much like a debit card.
• It’s easy to deposit it directly into a checking or savings account. Depositing into a federal deposit insurance backed bank or credit union helps to protect that money.

Cons:

• Cash does not carry any way to track it. If lost or stolen, it’s not easy to trace where it went, making it a bigger risk for carrying around.
• In some cases, cash can be “easier” to spend than a card. That is, a person may be more likely to spend cash if they have it than if they do not have it in hand.
• It’s much harder to track if used for spending purposes. That makes tax purposes and budgeting more difficult to manage.
• Without putting it onto a card, there is no way to use cash to make online purchases or pay bills that must be mailed or paid online.
• Without credit use, it’s hard to build a strong credit history that could be helpful later.

Paper Checks

A paper check is a piece of paper written out to the employee that is a type of promissory note to pay what is owed. A paper check notes the amount paid and earned, and it should outline all deductions, including taxes paid from the earnings.

Pros:

• It’s easy to deposit a check into either a checking or savings account. That provides federal deposit insurance on those funds.
• It’s possible to load the check onto a prepaid card for use.
• You can cash the check at your bank or the issuing bank, allowing you to have the cash to spend as you need.

Cons:

• If you don’t have a financial institution to deposit the funds into, you may have to pay a fee to access those funds.
• Sometimes, you may have delayed access to your funds when depositing a paper check, as the funds must move from the bank on which the check is drawn to the bank where the check is deposited.
• Paper checks can be lost or stolen.

Direct Deposit

A direct deposit transfers money from one location (such as an employer’s bank account) to another (like your own checking or savings account). Direct deposit is fast, often taking less time to process than paper checks.

Pros:

• The fastest way to get money owed to you electronically without the need to visit the bank to deposit the money.
• Most often, the funds can be used right away.
• It may be possible to split electronically deposited funds into more than one account, allowing a person to build their checking and savings account balances.
• There’s no fee to pay like cashing a check.
• Direct deposit sometimes helps a person qualify for no fees on their checking account.

Cons:

• In some situations, there could be fees on the direct deposit account, though many financial institutions do not have fees.
• Not all income providers, like employers or public benefit providers, provide a direct deposit as a payment option.

Payroll Cards

A payroll card or payment card allows the employer to place earnings onto a card rather than providing a deposit, check, or cash. Then, you can use the card where accepted.

Pros:

• This is a safer and more secure option with less risk than cash or a check.
• The payroll card will carry federal consumer protections limiting the risk of theft or errors.
• It’s possible to use the card just about anywhere.

Cons:

• Some cards carry fees for use or not using them enough.
• If you need cash, it is harder to take out those funds, and it may also come with fees when you need to withdraw the money from the card. It may be possible to avoid fees by transferring the money to a bank account from the card.

Electronic Benefit Transfer (EBT) Cards

An EBT is much like a payment or payroll card, with a few differences. Some public benefits programs use this method. The money provided to the individual is loaded onto the card directly, and the receiver can then use that card as they see fit in any location where EBT is accepted as payment.

Pros:

• This method is safer and more secure than using cash or checks for carrying earnings.
• It may be possible to use your EBT account (an online portal) to better track your spending. It may provide access to your current balance and payments you made. Not all states have this in place.

Cons:

• These cards are not always accepted, which means there could be some limitations on where the card can be used.
• Most often, you do not have a choice in using these cards. They may be the only option available to you from the provider.
• There could be some fees associated with using these cards. If so, there is no way to avoid those fees.

These are the most common payment forms, though others could exist.