Cash in Your Pocket: What is a Payroll Card?

What is a Payroll Card?

A payroll card looks remarkably similar to a debit or credit card. It generally bears the branding of major card issuers, such as Visa or MasterCard, and works in essentially the same way. People can bring them to various stores and other locations and use the card to pay directly.

When these cards are used as a form of payment, the employer will issue a card to the employee with the preloaded wages for the given pay period. This card, which does not need to be deposited by the bank, may offer many people more flexibility than other traditional payment systems. When the next pay period finishes, employers can reload the card with the employee’s wages quickly and efficiently.

How Payroll Cards Work

When employees reach the end of their first pay period, the employer will give them a card loaded with their agreed-upon wages. They receive this card instead of a paper check or direct deposit, so the funds are available immediately, without any additional action on their part.

For example, the employee does not have to go to a bank to cash their check or access their direct deposit funds. Since the card is accepted as a debit card in most places, the employee can start using it as soon as they receive it. When it comes time for their next payment, the employer will reload the existing card, giving the employee immediate access to their wages.

From the employer’s perspective, these cards also offer benefits. They do not have to cut physical checks for numerous employees or pay the fees associated with direct deposit. Instead, they can refill cards over the phone or online, making the payroll system more efficient.

Benefits of Payroll Cards

Payroll cards offer several benefits for employees and employers. As many as 18% of adults in the United States do not have bank accounts or use banking services that fully meet their needs. Therefore, access to payroll cards makes payments easier and more accessible for many people. Those without bank accounts do not need to pay additional fees to access their money.

For both employers and employees, the ability to reload cards online or over the phone makes the money more accessible and easier to manage. No one has to worry about paying fees for postage or deposits. Everything moves more efficiently.

Since the card account tracks the amount of money on the card, it can also be replaced if lost, even if there is a fee. This makes it more secure than cash.

Considerations for Employers and Employees

Of course, employers and employees do need to watch for some potential drawbacks to using these payroll cards. Specifically, employees may encounter fees such as:

• ATM fees
• Cash reloading fees
• Balance inquiry fees
• Fees for replacing lost or stolen cards.

Employers, therefore, must be careful that payroll card use does not violate other payroll laws through fees. Different states have different regulations, but many that have laws about payroll cards want to ensure that the fees do not lower employee wages below minimum wage or make wages unnecessarily difficult for people to access.

Comparing Payroll Cards to Other Payment Methods

Compared to other, more traditional payment methods, such as payroll cards vs. direct deposit or cash, payroll cards offer benefits and drawbacks.

• Direct deposit: Those without bank accounts will struggle to use direct deposit, which can also take more time and be more complex than loading cards. Bank security generally keeps people’s money safe, but employees will need a bank card to access their wages.
• Paper checks: Paper checks require others at the business to distribute the checks. It also takes time to write and cut all the checks, and the postage for each one can add up. People must also go to the bank to turn the check into cash.
• Cash: Unlike cards or checks, cash does not offer any option if lost or stolen. While it can be used immediately, it requires other employees to handle and distribute it and then the employee must keep it completely secured.

As you can see, the convenience, security, and speed of all these different methods vary, which means businesses must carefully evaluate their options for payroll.

Implementing Payroll Cards with Exact Payroll

If you think payroll cards for employees would be a good fit for your business, particularly if you have several employees without access to bank accounts, then Exact Payroll can help you easily and efficiently implement payroll card programs. With our expert assistance, the setup is straightforward, and you can start receiving the cost benefits and support to guide you throughout the process immediately.

Seize the Benefits of Payroll Cards

Payroll cards provide tremendous benefits to your employees, particularly if you have employees without bank accounts. Considering these cards as a convenient, efficient means of paying your employees will help you and your workers. Offering this as an option to your employees, in addition to the more traditional payment methods, can make your workplace more inclusive of your employees' needs and build a quality workplace experience.

Interested in offering payroll cards to your employees? Contact Exact Payroll to get started. Explore more about our solutions and how they can benefit your organization.