Payroll Cards Under Pressure: Seven Steps to Stay Out of Trouble

Source: Maureen Minehan, Employment Alert, Vol. 32 no. 12, June 12, 2015
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Intrigued by the idea of paying employees via debit cards? So are legislators around the country. According to the American Payroll Association (APA), seven states have introduced bills to regulate payroll cards just since January, with more expected over the next few months. …. A payroll card is a prepaid debit card used by employers to pay wages to employees. Each payday, a cardholder employee’s wages are deposited electronically into an account at a bank selected by the employer or by the payroll card vendor. The employee can obtain access to the funds in the account by using the payroll card. Similar to a bank-issued debit card, the payroll card can be used to withdraw funds from an ATM, make point-of-sale purchases, and electronically transfer funds, among other functions. …

Pinched by Plastic: The Impact of Payroll Cards on Low-Wage Workers
Source: New York State Attorney General, June 12, 2014

Employers in New York State and nationwide increasingly use payroll cards to pay wages. These cards can lead to numerous benefits for employers and employees, including cost savings for employers and convenience and lowered expenses for those employees who might otherwise use check cashing outlets. Payroll cards can be helpful for delivering wages in inclement weather or a disaster, and paperless payroll also brings environmental benefits. Despite these advantages, payroll cards can present serious problems for employees, especially low-wage or limited English proficient (LEP) workers, and those without internet or smartphone access. Virtually all payroll card programs charge fees for cardrelated activities, and these fees can add up, reducing the meager take-home pay received by the lowest paid workers in the state. In response to requests from the Office of the New York State Attorney General (“OAG”), 38 national and regional employers voluntarily submitted information on their use of payroll cards. A review of their responses revealed:
• Cardholder employees receive insufficient and confusing information about how to obtain their wages without paying a fee. Available information frequently comes in small type buried in a cardholder agreement, instead of as a clear, easyto-read list.
• Many payroll card programs charge fees for common transactions, including ATM use, point-of-sale transactions, and customer service. An overdraft of as little as $5.00 can trigger a fee as high as $25.00 in programs that charge for overdraft service. Employees without internet access can be charged simply to learn their account balance.
• Employers sometimes steer or require workers to receive wages by payroll card. Forty percent of employers surveyed did not provide employees the option to receive their wages through a traditional paper check and another 31% discouraged the selection of a paper check.
• In a subset of employers who provided particularly detailed fee information, three out of four cardholder employees incurred a fee of some kind. In some programs, the average per-employee fees ran as high as $20.00 per month.