What is a Payroll Card?

Malcolm Tatum

Payroll cards are financial cards that make it possible to access wages and other earnings issued to the cardholder by an employer. The use of a payroll card service makes it possible to eliminate the need for a direct deposit into a checking account as well as the necessity to manually deposit a paycheck into a bank account. With a payroll card, the employee can withdraw money from any automatic teller machine, or use the card in the same manner as any debit card.

A payroll card may be used to get cash from an ATM machine.
A payroll card may be used to get cash from an ATM machine.

Employees find that a payroll card approach carries several advantages. First, most programs make wages and salary available on the same day the employer issues the payments. That means there is no need to wait until the next business day to withdraw funds, as is often the case with a direct deposit to a bank account. This quick access to employer-issued compensation also means that employees do not have to rush to the bank in order to deposit a check before a particular time in the afternoon in order to have the funds posted to a checking account that same day.

Payroll cards can be used in the same manner as a debit card.
Payroll cards can be used in the same manner as a debit card.

Employers may also benefit from the use of a payroll card service to pay their employees. The process does not require any more steps than handling a direct deposit, and often simplifies the related processes of issuing receipts that detail the disbursement of the pay for the period cited. Employees can go online to view balances and also get a detailed report of withholding and distribution of the net pay with ease. This means less paperwork to generate for the employer.

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While a payroll card does have a number of benefits, it is important to note that not all programs of this type function in the same manner. There are many different types of fees that may or may not apply, depending on the program. For example, the payroll card setup may allow for the deduction of a monthly usage fee, a per transaction fee for any purchases made at stores using the card, ATM withdrawal fees, and card replacement fees. There is also the chance that a load fee will be charged each time funds from the employer are posted to the card. If the payroll card program allows employees to spend more money than is currently in the account, the card provider will charge an overdraft fee, similar to a bank overdraft fee that is incurred when a balance is overdrawn on a checking account.

While a payroll card program does provide many of the services and protections associated with a debit card connected to a checking account, the program may charge fees for transactions that are conducted at no charge when using a bank issued debit card. Depending on the particular payroll card program, the suite of services may not be comparable to using direct deposit to a checking account and accessing the funds via a debit card. For this reason, it is important to ask many direct questions before signing up for a program of this type. Failure to do so may lead to incurring a range of fees that were not anticipated and cut into the available income significantly.

A payroll card may look just like any other debit card.
A payroll card may look just like any other debit card.

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Discussion Comments

I personally think employee payroll card systems are a raw deal for the employees. Even if the employees don't have their own bank accounts (which is increasingly rare), the payroll card doesn't give the holder much flexibility in how to use their money. In many cases, the holder gets one free withdrawal per pay period, with extra transactions incurring fees. Depending on the issuing bank, there may not be any fee-free ATMs in a given area either. If you have your own bank account, it just seems cumbersome to have to receive pay on one card and figure out how to get the money to your "real" bank account to pay bills and such things.

I suppose, however, for people who either don't like having checking accounts or for people who don't use direct deposit for whatever reason, it may be better than the alternative of collecting a paper check every pay day and having to find someplace to cash it. Most of those check cashing places charge fees too, so for people in that situation, it's a bit of a pick-your-poison proposition.

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