If you have employees who do not have a bank account and who do not want one, they are either asking for payment in cash or are taking their paychecks to a check cashing service that charges a high fee. You can improve the situation for these workers by offering them a pay card, which is also known as a payroll card or debit card. The company transfers funds directly into the pay card, so there is no need for a check cashing service. Employees can make purchases directly with the card, or use it to obtain cash through an ATM. The company still issues a remittance advice to all pay card holders, so they can see the detail behind the amounts being paid to them.
Here are several additional advantages of having pay cards:
- Check fees. Pay cards eliminate the possibility of having to pay the occasional stop payment fee for a lost paycheck.
- First payment. Direct deposit is not usually possible for an employee’s first payment, but can be achieved with a pay card.
- Low fees. ATM cash withdrawal fees are much lower than the fees charged by check cashing services.
- Security. The pay card is protected by a personal identification number.
- Special payments. There is no need to cut a check for special payments, such as for an award or pay adjustment. Instead, simply send the cash to the pay card.
- Statement. Employees receive a monthly statement, detailing payments into and withdrawals from their account.
- Unclaimed property. Once funds are transferred to a pay card, they are the property of the recipient, so the employer no longer has to concern itself with remitting unclaimed pay to the state government under escheatment laws.
When compared to direct deposit, pay cards are the more attractive option for many employees. However, since direct deposit has been available far longer, pay cards have not gained as much traction in the marketplace.
A payroll card is also known as a pay card, prepaid payroll card, and a payroll debit card.