Payroll Cards: Know the Full Story
Employees who do not have a relationship with a financial institution are typically referred to as "unbanked," which prevents them from being paid by direct deposit. As a solution, some employers offer payroll cards.
What is a payroll card?
A payroll card is a reloadable prepaid debit card that is funded with employee net wages. (Like direct deposit, it is a form of electronic payment.) The employer deposits the employee's take-home wages into a payroll account, which is held by the payroll card company. The employee then uses the payroll card to withdraw money, purchase items and pay bills.
What are the benefits of a payroll card?
What kinds of fees are associated with the card?
Fees vary by payroll card company, but may include:
Considering that payroll cards are often offered to low-income earners who do not have bank accounts, the issue of fees is concerning. Fortunately, many states have payroll card laws limiting the fees that employees can be charged for using payroll cards.
Can employers require that all employees use payroll cards?
Per the Consumer Financial Protection Bureau, it is unlawful for employers to mandate payroll card use. If the employer wants to provide payroll cards, it must offer employees at least one other alternative, such as direct deposit or paper check. Many states have this rule as well.
What are some best practices to follow?
Let us know if you have any questions as you proceed.
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