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What is a Payroll Card? Definition, Benefits & Frequently Asked Questions

What is a Payroll Card? Definition, Benefits & Frequently Asked Questions

Payroll cards are a substitute form of payment that companies can make available to their employees. Employers use pay cards to streamline payroll processes, giving employees instant access to payroll or paychecks. This article explores what payroll cards are, why employers use them, the pros and cons of payroll cards, and FAQs about them.


What is a payroll card?

Payroll cards, also known as pay cards, are debit cards employers pay employees. They are usually provided through an employment contract with a prepaid debit card service or a major payment processing provider. Salaries are available without the need for employees to have direct deposit bank accounts or cash pay slips. Payments are debited electronically by cards on each payment cycle.

Payroll cards are subject to rules and regulations and have liability coverage similar to debit cards. Any payroll card issuer must reveal their fee structure and dispute process to anyone who uses their card. Payroll card issuers cannot change the card agreement terms without 21 days' notice.


The Benefits of Using Payroll Cards

Paying with a payroll card can benefit both employees and employers. Here are some benefits:

For Employers

If you're thinking of using a payroll card program for your business, here are some benefits to consider:

  • Save on the cost of printing checks, particularly if they need to be reissued if lost or stolen. Also, they can eliminate the need for supplies such as paper checks, ink, and envelopes.

  • Facilitate the payment of new or remote employees and temporary or contract workers.

  • Allow business owners to spend more time growing their business instead of going through payroll processes.


For Employees

Paying with payroll can provide many benefits, including:

  • Avoid bank overdraft fees, as employees cannot withdraw more money than they received

  • Elimination of taxes levied at cash-cashing businesses

  • Obtain a replacement card in case of loss or theft

  • Possibly offer options to receive a paycheck advance or payment after your manager approves the logged hours. Flexible payment options can provide instant financial assistance in an emergency.

  • Provide quick access to funds

  • Save time because employees don't have to cash checks.

  • Withdraw money from an ATM, shop online, make automatic payments, or transfer your payroll to a bank account

  • You receive payments without having a bank account.


Disadvantages of the payroll card

Some of the possible disadvantages of using payroll cards include:

  • If a card is stolen, the employer must recover these funds from the payroll company, and you may have to wait a few days to access the recovered funds.

  • Some locations do not accept payroll cards as a method of payment. You may need to take extra steps when paying bills or withdrawing cash.

  • Some payment cards include transaction fees for each purchase. For example, there may be fees if you receive a refund on a purchase or withdraw from an out-of-network ATM.


FAQs About Payroll Cards

Here are answers to some questions about payroll cards:

Can employers provide payroll cards as the only method of payment?

Employers cannot provide payroll cards as the only way to pay employees. They must offer another payment option by law, such as a direct deposit to a checking or savings account.


Where can Payroll cards be used?

You can usually get paid from your card at a bank, ATM, or place like a supermarket that offers cash back on a purchase. Payroll cards can generally be used at any business that accepts debit cards or online payments.


Do payroll cards have fees?

It usually doesn't hurt to use a payroll card. By law, employees must have free access to their entire payroll. This can be done by using an appropriate ATM, presenting the card to a bank teller, paying bills over the phone, or using the card for purchases.

However, fees may apply for electronic funds transfers or for the use of ATMs that are not part of the issuer's network. Card replacement fees, balance inquiries, or other fees may also apply.


What happens if a pay card is lost or stolen?

In the event of theft or loss of a card, a replacement card may be issued. You must inform your employer, who must immediately inform the bank or payment service provider. Generally, there is no penalty for unauthorized card use as long as the issuer reports the problem.


Do employees need payroll cards if they have bank accounts?

Employees can choose payroll cards, use direct deposit for their payment slips, or use both. For example, you can switch to a payroll card to avoid overdraft fees. Or you can use the card to reserve part of your payment or transfer funds efficiently. For example, you might want to put 90% in your bank account but leave 10% on the card for your college-age child.


Can payroll cards be managed online?

Employers can manage payroll cards online via a computer or phone 24/7 through online portals and applications. Funding is authorized electronically, so employee payments can be made on weekends, holidays, during storms, natural disasters, or other emergencies. You can also manage your payroll card online to view account balances, review transactions, or authorize online bill payments.


Can payroll cards be issued instantly?

Payment service providers can allow employers to keep unused cards, known as "white cards," and issue one to a new employee upon hire. This allows you to receive your first payroll on time without waiting for bank settlements. Employers can also use the cards to pay the final payroll as soon as an employee is terminated.


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