Payroll Debit Cards - Charging employees to get paid

[shugah]

i learned about payroll debit cards when i overheard a salesman trying to sell it as a partnership to a company that has 100s of clients. the thing that caught my attention was that it seemed there were 2 kickbacks in addition to the cost of the service. the company that provides the payroll debit card obviously gets paid (nothing wrong with that, payment for services is perfectly acceptable), the company that sells the payroll debit card service to the client gets some money, and the company that opts to use the payroll debit card gets some money too. but i was wondering where all that money came from... well, it seems that there are transaction fees for the paid employee to use the card, there is a fee for inactivity if the employee doesn't use the card for a period of time, there are limited withdrawals, with a fee if that limit is exceeded...

introducing the happy wonderful Payroll Debit Card:

The cost of switching from paper checks to paycards will depend on the payroll system you're using, how many employees you have and how often they're paid, but you're likely to see a speedy return on investment. Paper checks cost $1 to $2 each, while loading a paycard costs about 20 cents.

A win-win for business and labor (really? that would be unusual)

The cards are also far more convenient, especially for business owners who rely on part-time or young employees or workers who have recently immigrated to the U.S. - anyone who might not have a bank account. (About 17 percent of U.S. workers fall into that category.)

The cards are as easy to manage electronically as direct deposit, they eliminate the expense of printing and distributing paper checks, and they ensure that everyone gets paid on time and in full - benefits for any growing company.

Paycards can also build employee satisfaction and loyalty. They save workers the semi-larcenous 10 percent charged by the typical check-cashing store, are safer than carrying cash and can't get lost in the mail. What's more, they're handy financial-management tools, and not just for unbanked employees.

"The longer people have the card, the more they tend to use it as a debit card instead of withdrawing all their pay at once," says Lott. "We're even seeing people with direct deposit asking for a portion of their pay on a card. It gives them more control over their discretionary spending."
http://money.cnn.com/magazines/fsb/fsb_archive/2006/12/01/8395128/index.htm

more from ADP (the company "which handles payroll for one in six employees in the U.S"):
http://www.adp.com/mypaycheck/payroll_debit_cards.pdf

employees pay to get their money:
Similarly, the city of Dallas is saving almost the same amount while it splits fees with employees, paying the monthly maintenance cost for each debit card account and letting employees withdraw funds twice per pay period from ATMs without charge.

Paychex Inc., a payroll and benefits services company in Rochester, N.Y., that offers the Paychex Access Visa card, charges a $3 monthly maintenance fee and $1.50 for each ATM transaction in addition to any fee charged by the ATM. There are no fees when the card is used to make a purchase.
http://findarticles.com/p/articles/mi_m3495/is_4_48/ai_100243419
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[LiberalFighter]

1. For those that have a bank account it should be direct deposit.

For those without use a check.

[BlooInBloo]

3. Not quite. For those without: get one.

[shugah]

5. direct deposit is the often the only other option

offered by companies that are using the payroll debit card. but, for obvious reasons (i think) the card is pushed.

i know someone who is paid by this method - minimum wage employee, usually needs the $ pretty desperately a couple of days before payday - hasn't been able to reserve enough of the pay to open a checking account. he would like to open an account for direct deposit, but there is a lag of 3-6 weeks before all the paperwork can be processed (so they say). and, of course, he has to have the account before direct deposit can be set up. and he has to buy gas to get to work every day, and pay the bills, and buy some food... and the card is what he has in his hand.

damn but the greedy are cynical and cruel.

[BlooInBloo]

2. "They save workers the semi-larcenous 10 percent charged by the typical check-cashing store"

I rofl-ed.

[shugah]

6. it is funny

but sad if you have to cash your check at the check-cashing store, or pay the somewhat-less-larcenous employer who is paying you.

[Thegonagle]

14. Hmmn. 10% would be fully "larcenous," but the larceny fee typically isn't that high. LOL nt

[glowing]

4. They are very popular in the service industry... some companies have policies

that say get this card or have your money directly deposited into your account.

[SmileyRose]

7. Pros and Cons I see

CONS

The article is wrong on one point. Business still has to print the check stub telling employees what they were paid and what the deductions were. I get paid every 2 weeks and get a check with the stub, except the check portion is blank with the words "Direct Deposit XX Bank" on it. My husband gets paid the first of every month and gets a letter in the mail each month telling him all the info. - so that cost is still there. The Debit card does NOT save that cost. Even so, the cost to print a check is the least expensive part of processing payroll for all but the largest employers in the country.

Also, for most small to mid sized businesses - the very one's that employ most of America's workers, ADP is an awful way to process payroll to begin with. ADP has been losing market share and is looking for new ways to get a cut of the payroll dollars.

Lastly, employees that are used to dealing on cash only, will have to get used to tracking spending on the debit card. The credit card crisis has proven people don't censor their purchases as well with a piece of plastic over cold hard cash. There is something tactile about looking in the wallet and realizing you only have $12 to get to next week.

PROS

Saves employees the cost of paycheck cashing - a cost IMHO that should be criminalized because it's so high. It also keeps them from having all that cash that can easily be stolen. If robbed, they can call the service line, have the debit card closed and a new one issued before the thief robs them of every cent they own.

Overall, probably a winner if the employee can take the mental leap of keeping track of the spending on the debit card over physically looking at how many 5's are left in their wallet.


edit - typo

[shugah]

8. there were a couple of articles linked

and i personally think that employers charging employees to get THEIR earned money is reprehensible. yes, the check cashing stores are also morally bankrupt. but the payroll debit cards are the EXACT same thing, except that the employer is taking advantage of the employee instead of some remote third party.

you do realize that for an "unbanked" employee (that is the term used by the payroll debit card proponents) the only way to avoid paying fees is to withdraw all their pay in cash in 1-2 withdrawals. so, any payroll debit card paid employee that reads and understands all the fine print will probably still be carrying around cash.

[yellowdogintexas]

9. I am receiving unemployment benefits via a debit card. Every 2 weeks, the

funds drop into the card. I am allowed a free cash advance anywhere every deposit installment, and if I want to I can take out the entire balance. All purchases are free. In addition, the card is a CHASE bank card and any ATM withdrawals at a CHASE ATM are free.

So what I do each installment period is call and check the balance, leave some money on the card for the odd meal, movie ticket, small purchase, go to my own bank and take a cash advance for the remainder and have them load it straight into my bank account, at no charge.

Any ATM will also verify the balance on the card, even if I do not take any money.

I have only had one small service charge of $2 for an ATM withdrawal at a non Chase ATM.

It does seem to be a safer alternative for an unbanked recipient, since the state has made it as easy as possible to keep up with the balance, move the money or just use the money.

[LeftyMom]

10. There's a similar system here for people on welfare, but unemployment is still paper checks

I think most recipients would chance the odd ATM fee to be able to get the money promptly, were that an option, though direct deposit to one's own bank account would of course be better.

[yellowdogintexas]

11. oh I would have preferred direct deposit, but the debit card is handy enough

and the only problem is having to physically go to my own bank to move that money every two weeks or so. If I know I am going to make a more substantial purchase I just use the card for that and then roll money to my bank account the next cycle.
At least the household has another income.

It seems that re: the payroll thing if you manipulate it right you could avoid ATM fees. You probably can monitor it online.

[WillowTree]

13. "Business still has to print the check stub"......Not necessarily

My employer recently gave those of us who have direct deposit the option to opt out of receiving the paper payroll stub and to be able to access it online. Works great for me because I can just download it to my PC because prior to this I would just bring the paper stub home and scan it anyway and then shred it. I and quite a few of my co-workers have been really pleased with the really paperless option.

[TahitiNut]

12. The Social Security Adminstration is pushing debit cards as an alternative to direct deposit.

Like many organizations, they just don't like the expense of producing checks. The fraud in this is that the employers and agencies pushing the debit cards want to gain MORE than mere expense reduction and get a cut of the 'action.' Rather than pass on the reduction in expense to employees, they'd rather choke on it than actually give the employees anything more than they have to.

Our 'relationships' are becoming more and more PREDATORY. Retail goods are sold more and more with predatory practices ... reducing labor costs more to increase profits than lower price and preying upon employees for "casual overtime" and payola on the fees paid for services. Disgusting.


FWIW, there are some good reasons folks might not be able to open a checking account ... especially these days after the Bankruptcy Deform Act.

[conscious evolution]

15. I worked for a company that had these

At first I thought it was going to be a rip off.
I was surprised to find it wasn't.
The only charges against me were the usual ATM fees if I used an atm that belonged to another bank or institution.

That said,Ican see where dishonest companies will attempt to rip off employees.