What's The Deal With Payroll Debit Cards?
Payroll debit cards came on the scene a few years ago, and since then they have generated more than a little animosity. They seem very convenient, but they do have issues. The cards can be a welcome addition to your range of pay options if you handle them properly. But that's the key -- you have to roll out the program in the right circumstances so that your employees do not feel pressured to use them and do not assume something's wrong. This is because the way the cards have been used in the past has caused concern for lower-wage workers.
What Are Payroll Debit Cards?
These cards function like prepaid debit cards except with you depositing the money for the worker to use. Your company sends the pay as if you were making a direct deposit, only the money goes to the card instead of into a bank account. The employee can then withdraw the money or use the card like a debit card over the course of the month.
Why Did They Get the Reception That They Did?
The thing about these debit cards is that, like other cards, there are fees associated with most methods of getting money off the card. Using the card in a store to pay for items is generally fee-free, so the worker can get cash back for free. But to get money out of an ATM or get the entire amount off the card often requires a noticeable fee. While a few dollars might not seem like that much to you, it can be annoying to a worker because that's like a small pay cut every month.
Unfortunately, some companies have switched all of their payroll to these cards, leaving employees with no choice but to use them. That means that employees who used to have a free direct deposit into their bank accounts now had to cough up these fees, plus they had to take an extra step to get money for their rent, which often can't be paid off a debit card if the landlord doesn't take electronic payments.
When Should You Use Them?
These cards are very handy for people who don't have bank accounts. If someone's credit is really bad, they may qualify for only those accounts that have really onerous terms, like massive minimum balance and fee requirements, or they might not be able to get an account at all, thus leaving them to rely on check-cashing places. These check-cashing fees can be huge, so the card fees are actually a nice break for people who have to pay a fee to begin with.
Do offer these cards if there is interest in them or if you know that there are people in your employ who use check-cashing services. Do not offer them as the sole type of payment-receipt method. These are excellent auxiliary methods, so if you want to add the cards to the list of methods by which your employees can choose to be paid, contact a payroll service, like Watson & Company Inc., that knows how to send payments to several different destinations.