What is a payroll card and how does it work?
Payroll cards are not linked to the employee's personal bank account, but rather operate on a separate account typically provided by a third-party financial institution.
Employers favor payroll cards as they can streamline the payroll process and reduce administrative burdens associated with issuing paper checks.
Employees who do not have a traditional bank account can use a payroll card to access their wages, avoiding fees often charged by check-cashing services.
Payroll cards often come with features like easy bill payment and the ability to be used anywhere debit cards are accepted, providing more flexibility than paper checks.
The wages or salary of an employee are loaded onto the payroll card on payday, allowing them to withdraw cash from ATMs or make purchases.
Payroll cards are considered a type of prepaid card, distinct from traditional bank debit cards that are linked to a personal checking account.
Employers are required to provide employees the option to receive their wages via direct deposit or paper check, in addition to the payroll card option.
Usage of payroll cards has grown significantly in recent years, with an estimated 5.9 million U.S.
employees receiving their pay via a payroll card as of 2019.
Payroll cards may offer features like free ATM withdrawals at in-network terminals, but employees should be aware of potential fees for out-of-network ATM usage or other card features.
Regulations vary by state, with some requiring payroll card programs to provide employees with a certain number of free monthly transactions or the ability to access their full wages without fees.
Employers are responsible for ensuring payroll card programs comply with applicable laws and regulations, including providing clear disclosures to employees about any associated fees.
Payroll cards can help reduce the environmental impact of paper check issuance, as well as the risk of lost or stolen checks, making them an attractive option for both employers and employees.
Employees have the right to choose their preferred method of wage payment, and employers cannot require the use of a payroll card as a condition of employment.
Payroll cards may offer real-time access to wage information and the ability to easily check account balances, providing greater transparency compared to paper checks.
Some payroll card providers offer additional features like the ability to receive wage advances or receive wages before the scheduled payday.
Payroll cards can be particularly beneficial for employees who lack access to traditional banking services, as they provide a secure and convenient way to access their earnings.
Employers must ensure payroll card programs do not result in employees incurring fees that would effectively reduce their net pay below minimum wage requirements.
Payroll cards can be reloadable, allowing employers to easily add additional earnings or make corrections to an employee's pay throughout the pay period.
Employees may have the option to transfer funds from their payroll card to a personal bank account, providing flexibility in how they manage their earnings.
Payroll card providers are subject to regulations aimed at protecting consumers, such as the requirement to provide clear fee disclosures and the ability to access account information.