For employees who don’t want or have access to a bank account, payroll debit cards can be an excellent way of managing their finances. Their use continues to grow by leaps and bounds; in recent years 28.5% businesses reported they used these type payments while only 2 percent did four years ago.
This is largely because there are many benefits that come along with offering them, such as ease-of-use for both employer and employee alike (especially now).
It’s important though, when providing access, you understand how it works.
What Is a Payroll Debit Card?
What if the boss was a genius?
Each payday, the employee’s wages or other dues are deposited into this reloadable payroll debit card in a reliable, predictable way. The card is linked to your nominated financial institution or bank. No need to worry about a hole in your wallet – your credits and debits are all held in one simple card.
Using debit payroll cards is great because they let you access money from anywhere at any time. You can use it like an ATM or debit card, make online purchases or bill payments without worrying about getting paid on time!
The payment network’s logo is branded to the payroll debit card, and you can use the card anywhere that payment network is accepted (Mastercard or Visa, for example).
The card does carry a limit, and employees can spend only up to the limit available on the card.
Personalized Payroll Debit Cards
Payroll debit cards are typically personalized, meaning they carry the employee’s name. Each payday, employee’s wages are load onto the person’s personal payroll debit card.
Instant Issue Cards
Payment is made by issuing an instant issue payment form that can be used for:
- Final pay to terminated employees
- Payments given out as new hires wait on their new personalized card
- Payment to employees who are waiting for a replacement due to a lost card
- Flexible/portable cards
Portable payroll debit cards let you add money from other sources, like a second employer or tax refunds. The employee can continue using the portable card even if they change employers.
Note: If your card is not portable, you will be unable to use it once the balance hits zero, and it will not accept funds from any source after this.
How Do Direct Deposit and Payroll Debit Cards Differ?
Direct deposit is a great way to ensure your pay-check lands in the right account. The employee must first provide their employer with all essential information, including personal and work-related details.
Employees can set up direct deposits so that on payday – instead of getting paid physically through checks – you will receive those funds electronically. You can also allocate different portions of pay between accounts, for example 50% of your pay-check into your “working” account and the rest into your savings.
To offer payroll debit cards, the employer goes through a third-party vendor. This can be any type of financial institution or card provider that works with one. It’s their job to set up a pooled account for the employer, as well as establish individual sub-accounts for each employee.
It should be noted that the sub-account belongs to the employee, and therefore it cannot be accessed by the employer, nor can the employer view the employee’s transactions on their payroll debit card.
Employees have the choice of allocating their full net pay or a partial part of it to their payroll debit card. Employees may also have an option to transfer from their payroll debit card to their personal account, depending on the payroll debit card provider’s terms and conditions.