Payroll Card Definition

What Is a Payroll Card?

A payroll card is a prepaid card on which an employer loads an employee’s wages or salary each payday. Payroll cards are an alternative to direct deposit or paper checks. These cards are manufactured by major payment processors, such as Visa, allowing workers to use them anywhere electronic payment cards are accepted.

Users can access their money from an ATM or cashback purchase in the same manner as with a traditional debit card. Payroll cards are also reloadable, so a worker need not receive a new card each pay period.

Key Takeaways

  • A payroll card is a prepaid card some employers use to pay their employees’ wages or salaries each payday.
  • Payroll cards help employers save money by not having to issue printed checks and also allow them to offer cards to employees who do not have bank accounts.
  • For employees, advantages to payroll cards include the ability to pay bills online, shop online, make automatic bill payments, and get cash at an ATM.
  • Disadvantages include the possibility of monthly maintenance fees, out-of-network ATM fees, and balance inquiry fees.

Understanding Payroll Cards

Some employers offer payroll cards an alternative to direct deposit or as a service for low-income employees who do not have bank accounts. Some employers who hire temporary or seasonal workers will also use payroll cards. They can be compared to prepaid debit cards. Generally, they can be provided through an employer agreement with a prepaid debit card service provider.

According to a report from the research firm Aite Group, the number of active payroll cards in the U.S. will reach an estimated 8.4 million with a total card load of $60 billion by 2022.

Advantages of Payroll Cards

Payroll cards have advantages for both employers and employees. Employers save money by not having to issue paper checks. Employees who don’t have bank accounts get their money instantly, just like employees who use direct deposit, and they don’t have to pay check-cashing fees or worry about losing large sums of cash.

Employees can use payroll cards to pay bills and shop online. Payroll cards can also be used for automatic bill payments. Employees can also use their payroll cards to get cash at an ATM, just like employees with checking accounts and debit cards can. Some payroll cards can also be used to get cash back at the point of sale at certain grocery stores and convenience stores.

Employees don’t need to have a good credit score or any credit history to receive and use a payroll card, because it isn’t a credit card. It’s impossible to go into debt with the card because there’s no credit available and no overdraft allowed. Payroll cards can be replaced if they are lost or stolen, without loss of funds. Employees can also add funds to their payroll cards; they aren’t limited to only having payroll funds added by their employer.

Disadvantages of Payroll Cards

A downside of these cards for employees is that they usually charge monthly maintenance fees as well as other fees for certain transactions. Fees vary by issuer, but examples include a $5.95 monthly account maintenance fee, a $9.95 fee to replace a lost or stolen card, a $0.50 ATM balance inquiry fee, and a $2.50 out-of-network ATM fee. These fees can often be higher than traditional checking account fees for certain activities.

It’s important for payroll cardholders to understand that their cards may have fees and to learn what actions will trigger those fees so they can avoid them. If the fees are too high, the employee may have the option to be paid by another method.

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