What you need to know about payroll debit cards

If you’re one of the more than 70 million Americans who work as hourly employees, chances are good that you may soon be offered a payroll debit card instead of a traditional paper check on payday.

 While these debit cards are much less expensive for employers, they can come at a cost for the employees who are depending on them. What’s worse, some employers are (illegally) telling their employees they have no other choice than to accept their pay in the form of a fee-laden debit card.

 Before you find yourself in a confusing and potentially contentious conversation with your boss, here’s what you need to know about payroll debit cards:

How Payroll Debit Cards Work

 These cards are very much like any other prepaid debit card, including the logo (and backing) of major brands like Visa and MasterCard. But instead of loading money onto the card yourself, your employer will load your earnings onto your card every pay period.

 Payroll debit cards can be used just like a debit or credit card, so employees receiving them can generally use them for purchases at stores and to pay their bills online. Some also come with convenience checks, which allow users to pay their rent or other non-card-friendly bills. These cards come with some consumer protections in case of loss or theft, although the protections are generally less robust than those of regular debit and credit cards. (For instance, Visa’s liability policy for payroll debit cards doesn’t protect you if your card is used at an ATM by an unauthorized user.)

Costs to the Employee

 The biggest concern about these cards is that they can often be fee-heavy. These fees can include:

     Monthly fee

    Fee for each ATM transaction

    Surcharge at the ATM

    Inactivity fee

    Fee after a certain number of transactions per month

    Card replacement fee

    Fee for using the card at a point-of-sale terminal (such as those in stores)

    Load fee, when funds are put on the card

    Fee to have a check cut from the card 

Considering the fact that each fee could range anywhere from $1.50 to $10.00, employees with particularly fee-laden cards may find all of their earnings eaten up by fees.

Know Your Rights

 In a recent lawsuit over these payroll debit cards, Natalie Gunshannon, a McDonald’s employee, claims they told her she couldn’t opt for a different method of payment. 

Unfortunately for employers, refusing to give an alternative payment option to the payroll debit card is illegal. The Consumer Financial Protection Bureau mandates that all employers offer their employees a choice of earnings payment options. (In many cases, this choice will be between the payroll debit card and direct deposit, as they’re the two least-costly options for employers.)

 In addition, if you do opt for the debit card, know that federal law requires disclosure of all payroll debit card costs. In many workplaces, employees will be offered in-person training regarding card use, as well as literature on the specifics of the card. If you’re not offered such disclosure, let your employer know that you need to know what to expect from your payroll debit card.

The Bottom Line

 Payroll debit cards can be a boon to some of the millions of workers who are currently unbanked. However, it’s very important that employees offered such payment are completely aware of the possible consequences of receiving their wages in this fashion.