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More employees are being paid via a prepaid debit card called a payroll card, as some seek an alternative payment method to a paper check or direct deposit. Some employers opt to pay employees with a payroll card because it may be easier and less expensive than other forms of payment, while others want to accommodate unbanked or underbanked workers who cannot accept direct deposit.
If your job offers payment via payroll card, there are some pros and cons to consider before accepting this form of payment. Let’s explore what a payroll card is and whether it’s a good option for you.
A payroll card is a prepaid debit card that allows employees to access their paychecks and receive wages directly on the card. You can use the card like any other debit card to make purchases or withdraw cash.
But just because your employer offers you a payroll card doesn’t mean you’re required to accept payment that way. Legally, your employer must provide you with at least one alternative to a payroll card. For example, some employers offer a choice of having your pay deposited directly onto a payroll card or into your bank account. Other employers might only let you choose between receiving a paper check and getting paid on a prepaid card. Your local law decides what choices your employer is required to offer you.
While there are some benefits to using a payroll card, most payroll cards come with a variety of fees that can quickly add up, including:
Some employers offer payroll card programs that try to limit fees. For example, they might choose cards with apps that allow employees to view balances and manage money without going to the ATM. But generally, using payroll cards involves paying fees.
The fees might seem small, but over time they can add up to take a big chunk out of your take-home paycheck. For example, for one month, you might get charged $2 to withdraw from an ATM, $5 to add more cash to the card and $2 each for every 10 transactions you make. That could easily add up to hundreds of dollars in fees over the course of a year. And if your card gets lost or stolen, or you make more than the allowed number of transactions in any given month, your fees can climb even higher.
Most state laws require that employees be allowed to take out their entire paycheck (either at a bank or by courtesy check) without any fees every pay period. If you did that, you could deposit your paycheck with a bank or credit union that doesn’t charge fees when you access your money or request a new card.
Payroll cards can involve a lot of fees, but by following these tips, you can help minimize those costs and enjoy the convenience offered by payroll cards without breaking the bank:
If you’re not comfortable using a payroll card, there are several other options available to you. One of the most common alternatives is direct deposit, which allows you to have your wages deposited directly into your bank account.
If you’ve never had a bank account, or have had negative experiences with banks in the past, you might:
Payroll cards can be a convenient way to access your paycheck, but they often come with unexpected costs. Getting your paycheck through a checking account may connect you with more tools to manage your money, and selecting a checking account with perks that align with your goals can help your money work harder for you.
For example, consider the Experian Smart Money™ Digital Checking Account & Debit Card. It automatically links to Experian Boost®ø to give you credit for eligible bill payments, which can help you build credit without debt. Other benefits you probably won’t get with a payroll card include no monthly fees¶, access to more than 55,000 fee-free ATMs worldwide** and the potential to receive your paychecks up to two days early when you enroll in direct deposit†.
You can get an Experian Smart Money Digital Checking Account through a free or paid Experian membership, which also gives you access to your FICO® Score☉ , Experian credit report and more. See terms at experian.com/legal.
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