Employees are typically paid in one of three ways: check, direct deposit into an account or in cash. Each has advantages and disadvantages. Getting paid in cash is typically the most convenient form of payment for people who use the money to make purchases in person. The biggest downside to getting paid in cash is that it makes filing taxes more difficult because taxes likely have not been taken out of your paycheck. It also makes you more likely to get audited. However, cash payments come with a number of advantages.
Getting paid with cash is convenient. When you are paid personal checks for odd jobs like babysitting or mowing the neighbour's lawn, you often have to wait a few days for the check to clear after you deposit it before you can access the funds. According to the Comptroller of the Currency Administrator of National Banks website, banks can also place a hold on a payroll check from your company until it clears. However, payroll checks are typically considered low risk and are often available immediately, especially if the check is issued by the same bank you use, but you still have to drive to your bank to deposit the check. Similarly, direct deposits are available on your payday, but you need to find an ATM to withdraw the cash or use a debit card. When you have cash, you can use the money immediately.
Cash also allows you to control your spending easier than using checks or debit cards. When you use a debit card to make payments or purchases, you need to monitor your statement or account balance to keep track of what you spend and how much you have left. The same goes for writing checks; you need to balance your checkbook to monitor what you have left in your accounts, or wait for the checks to clear and view your account balance. Cash simplifies the process; if you have cash, you can make a payment or purchase with the money you have. When you are out of cash, you cannot make the payment or purchase. This simplicity helps you avoid overlimit or overdrawn fees on your bank account.
Cash is also advantageous when budgeting your money each month. One style of budgeting is the envelope system. This method entails creating an envelope for each regular expense you have, such as groceries, entertainment, gas and utilities. Each time you are paid, you put a specified amount of cash in each envelope, and use the cash from that envelope to pay for expenses in that particular category. When the envelope is empty, you cannot spend in that category until the next time you are able to put more money into that envelope. This system helps you stay on budget and avoid overspending in any particular category.
Accepted Form of Payment
Cash is also a widely acceptable form of payment for most merchants. Many merchants no longer accept checks and prefer cash over credit cards due to fees they must pay credit card companies per transaction. However, all retail stores accept cash. Also, many utility companies allow you to pay your bills in person in cash at local offices or branches. If you prefer to pay electronically, you can deposit the cash into your account to pay your bills immediately.