Payroll Debit Cards Explained: Does It Make Sense For Your Company To Provide Them to Your Employees?

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Payroll Debit Cards Explained - Does It Make Sense For Your Company To Provide Them to Your Employees

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.

The Big Pluses of Payroll Debit Cards in 2020

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Payroll Debit Cards in 2020

The Big Pluses of Payroll Debit Cards in 2020 by The Payroll Company 505-944-0105

In 2020 private companies are issuing payroll debit cards to employees to pay them. There are state regulations on payroll debit cards created to cover the rights of employees that employers must comply with. Prepaid debit cards are also used to provide access to unemployment payments. There are several states that issue unemployment benefits debit cards, which are reloadable. Payroll Debit cards are provided quite often to employees that do not have access to a bank account for one reason or another.  

How Payroll Debit Cards Operate

Much like a debit card connected to a bank account set up with direct deposit of payroll, payroll debit cards operate the same way. The only difference between the two is that only funds from payroll can be deposited onto a payroll debit cards, which is unlike a bank account with a debit card. Each payday, the payroll due to an employee are added to the payroll debit card, which has immediate availability. The payroll debit card can be used to access cash at ATM machines, and it can be used to pay for services like rideshare or for goods like groceries. Cash can be drawn out at an ATM with no fee being charged, just so long as it is done at in network bank ATM machine.  

Payroll Debit Card Regulations

Regulations on payroll debit cards are more like the regulation for debit cards compared to retail all-purpose reloadable debit cards for sale at retail stores. The fact is they are looked at as a prepaid debit card and not a regular bank account debit card. Retail reloadable debit cards have no regulations covering a consumer’s liability for any charges on the card that were not authorized. Debit cards and payroll debit cards have the protections when it comes to liability. Payroll debit card providers are mandated by law to provide the structure of their fees and provide a process in writing to customer dispute resolution. However, retail reloadable debit cards do not have the same requirements. Both payroll debit card and regular bank debit card providers by law may not make any updates to their card agreement terms without providing notice 21 days in advance. Retail preloaded debit card issuers can make changes to their card agreement terms without providing notice of any kind.

Payroll Debit Card Pluses

The advantages of payroll debit cards compared to paper paychecks are numerous. The most apparent plus is a payroll debit card can be used anywhere anytime and a paper check has be cashed at a bank or check cashing business, which most of the time means a fee must be paid when the check is cashed. The next plus is that the company saves time and money on payroll because it does not have to take the time to print checks and hand them out and it does not have to pay an employee to process and print payroll checks and hand them out directly to each employee. A third plus is that because payroll checks are not being printed it saves the company money on ink and it helps our planets ecology because a tree was not need to provide the paper to print the check on. Each state has regulations about issuing payroll checks or payroll debit cards. Check to see what your state’s regulations are about how you can issue payroll so you stay in compliance with your state’s payroll laws and regulation.

All in all payroll debit cards have their place in 2020. Preferably small business are better off issuing payroll through direct deposit, but one of the next best things is to issue payroll using debit cards.

Benefits of Payroll Debit Cards for Employees and Employers in 2019 – Part Two

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Companies need to check to see if there are extra fees assessed to employees when issuing payroll themselves via debit card and when choosing a payroll processing company offering pay debit card program. Companies need to offer several ways for company employees to receive their pay. A company is not allowed by law to require employees to receive pay solely by payroll debit card. Employees must be provided several options as to how they receive their wages, not just via debit check card. It has been reported over recent years that some employers didn’t do this for their employees, which is against the law. In response the Consumer Financial Protection Bureau issued a bulletin covering legal regulations covering payroll cards. The main points on the bulletin were as follows:

  • Fee Documentation – Documentation must be provided of fees
    charged by the issuing bank to the employee related the EFTs (electronic fund
    transfers) and written explanation about liability limits.
  • Account Records Access – Regular statements must be given to
    card holders by payroll debit card issuers electronically online or telephonically
    providing account transaction history and fees charged.
  • Unauthorized Transfer Liability Limits – Employee’s limit of
    liability for use not granted if reported within a specific written time period.
  • Rights to Resolution for Errors – Payroll debit card financial
    institution mandated response to card holder within 6 months of occurrence of mistake
    or error.

Several different organizations over recent years have provided
statements about the pluses of wages being disbursed to employees via payroll
debit cards and regarding the top ways for employers to make the most of the
program for their employees. The top recommendations included issuing pay without
fees being charged (employer pays the fees) and to provide the wages using the
top credit card brands such as VISA, MASTERCARD and DISCOVER. Employers must also
give complete documentation of fees employees may incur.

Payroll debit cards are a big part of
providing payroll to employees today that do not have a bank account. Operated
correctly, payroll debit cards provide wages at a low cost with speed, easy and
convenience to employees. The program helps both the employer and employee work
together efficiently. Look today with your local payroll company to see if your
company can save money and improve its payroll process each month by starting a
payroll debit card program as part of its payroll disbursement options.

Benefits of Payroll Debit Cards for Employees and Employers in 2019 – Part One

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Payroll debit cards are written about negatively from time to time in the press, but it doesn’t mean this relatively new device for delivering payroll should be done away with by companies using them issue wages to employees. Virtually every consumer transaction today to make purchases of goods and services can be done with a debit card. Cash still works, but you cannot use it very easily to purchase a plane ticket for example. Payroll debt cards have both pluses and minuses for employees and employers, but they are widely accepted and provide a huge advantage for a lot reasons. Paying wages through payroll debit cards can be issued by employers themselves or through a payroll processing company.

Advocates talk about how payroll debit cards to employers as a method to lower payroll expenses and improve company effectiveness. With delivery of payroll on a payroll debit card on payday each employee receives their pay via direct deposit on the card. This method makes it easy for companies to reconcile their payroll bank account. Getting rid of printing payroll checks and mailing or handing them out generates direct savings for companies with respect to costs, time and elimination of payroll checks never arriving or getting stolen. Payroll debits cards are a game changer for company payroll processing because they level the playing field for all employees when it comes to payday because everyone gets paid the same time with wages available to all immediately without the need accept a paper paycheck and then go to the bank or a check cashing place and cash it. Payroll debit card programs offered by payroll processing companies in some instances do have fees, making it unfair to employees receiving pay on a payroll debit card.

Payroll debit cards are part of the new era of doing everything electronically. When done right, they provide a convenient and a cost-effective way of delivering payroll and one that is mutually beneficial to both employers and their workforce. Investigate how much money your company can potentially save by implementing a payroll card program and learn how it can streamline your payroll processing.

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