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Payroll Card: Process, Advantages & Disadvantages

April 16, 2024

Employees can often choose from several options when it comes to receiving compensation for their work. Some of the options are direct deposit to their bank account, paper checks, and prepaid debit cards. These are also known as payroll cards.

Keep reading to learn about payroll cards and their advantages and drawbacks. Doing so will help employees decide whether they are a suitable option.

Table of Contents

What Is a Payroll Card?

How Payroll Cards Work

Advantages of Payroll Cards

Disadvantages of Payroll Cards

Key Takeaways

Frequently Asked Questions

What Is a Payroll Card?

A payroll card is a prepaid debit card that an employer can offer to its employees so they can receive wages electronically. It represents an alternative to a paper check and direct deposit payroll.

Major payment processors like Visa and MasterCard manufacture payroll cards. People may use them wherever electronic payment is accepted.

There are several types of payroll cards:

Branded Payroll Cards – These cards carry the logo of major payment networks like MasterCard or Visa.
Personalized Payroll Cards – One personalizes these cards with the employee’s name. While some people assume the employer can access these cards, this isn’t the case. The employer can’t see how or where you spend money using the card.
Instant-Issue Payroll Cards – These cards are not personalized and are quickly issued to employees for immediate use. An instant issue payroll card is usually a temporary solution. An employee uses it until they receive their personalized card.
Portable Payroll Cards – Such cards can accept money from other sources, not just one employer. Portable payroll cards are an excellent option for those who have multiple jobs.

How Payroll Cards Work

First, the employer researches payroll card vendors and the best payroll card programs for both the company and the employees. Once the employer chooses a program, they will give the employees their cards.

Along with the cards, the employer provides cardholder disclosures. They also provide card packets and access to the card balance and transaction history. Regardless of the type of card an employee has, the employer can never access their accounts.

Each pay period, employees will receive their earned wages on their payroll cards. The funds are available immediately. As with direct deposit, the employer can reverse the payment, but only due to an error.

An employee can use a payroll prepaid card to pay bills online, shop online, or withdraw cash from ATMs. You can also use payroll cards at grocery stores or for making purchases. If an employee needs cash, they can ask for the cashback option when making a purchase.

If you lose your payroll card or suspect someone stole it, call the customer service branch of the issuing financial institution ASAP. You should report a lost or stolen card immediately to reduce the possibility of unauthorized transactions. Keep in mind that you may need to pay a fee to replace the card.

Advantages of Payroll Cards

A payroll card is beneficial for both the employer and the employee.

Here’s how a payroll card benefits the employer:

Cost Cutting

Employers don’t have to waste resources to print paper checks. Instead, they can use a payroll card to deposit money into their employees’ accounts.

Simple to Set Up

Most payroll cards are easy to set up. Payroll card providers do most of the work and can have the cards ready in a matter of minutes.

Moreover, if employees have an issue with the card, they don’t go to the employer. Instead, they go to the payroll card provider. This means the employer has essentially no access to employees’ finances.

Reliability

Paper checks can suffer from damage. When that happens, employers need to issue another check, and employees have to wait to access their money. With payroll cards, this is never a problem. Employers can be 100% sure that employees receive their money.

Here’s how an employee benefits from a payroll card:

Quick Access

One of the greatest advantages of a payroll card is that it provides instant access to funds in a bank account. Once the employer deposits the money, employees can withdraw cash, pay fees, make bill payments, shop online, etc.

Ease of Use

Payroll cards are incredibly easy to use, even if the employee doesn’t have a checking account. Any location that accepts debit cards also accepts payroll cards. This means employees can use them at grocery stores, outlets, pharmacies, or gas stations.

Financial Wellness

Many payroll card programs offer their customers different tools that promote financial wellness. Such tools can help employees save money and plan their budgets efficiently.

Discounts

Many payroll card programs cooperate with different retailers. Together, they offer excellent discounts to their customers.

Earned Wage Access

Earned wage access (EWA) is among the most significant benefits of payroll cards. This financial service allows employees to access a part of their already-earned wages before payday.

Thanks to EWA, employees can avoid taking a payday loan or using their credit card if they need some money right away.

Easy Money Management

Many payroll cards come with apps that enable employees to check their account balance and transaction history without paying fees.

Disadvantages of Payroll Cards

While payroll cards have many advantages, they aren’t flawless. It’s important to consider some of their drawbacks:

Lost or Stolen Cards

There’s always the risk of a payroll card getting lost or stolen. This isn’t a problem if the employee immediately notices the card is missing. However, if this doesn’t happen and the card ends up in the wrong hands, you might lose funds from the account.

Since many shops and grocery stores don’t ask for identification, someone could use the payroll card as their own.

Fortunately, a lost or stolen card doesn’t represent a problem if the employee acts quickly. They must report it to the appropriate financial institution ASAP.

Potential Fees

Depending on the payroll card type, employees may need to pay ATM withdrawal fees when accessing their funds.

Maximum Withdrawal Limit

Some ATMs have a maximum withdrawal limit. If an employee needs to withdraw their entire paycheck at once, they may not be able to do so. This can be a problem if the employee needs the money urgently.

Accounting Plus Payroll Together at Last

Key Takeaways

A payroll card is a prepaid card that allows employees to receive their wages electronically. The card is easy to set up and use and offers many benefits to both the employer and the employee.

So, it’s no surprise that many companies decide to get payroll cards for their employees. In many ways, they are more practical than direct deposit or paper checks.

FAQ on Payroll Card

Can You Withdraw Cash From a Payroll Card?

Yes, you can use a payroll card to access an ATM and withdraw cash. Keep in mind that you may need to pay ATM withdrawal fees.

How Much Does a Payroll Card Cost?

Payroll card costs depend on the provider. Some providers may charge a monthly fee, while others charge fees for ATM withdrawals, inactivity, or reloads.

Can You Transfer Money From a Payroll Card to a Bank Account?

Whether or not you’re able to transfer money from a payroll card to a bank account depends on the payroll card provider. It also depends on the program chosen by the employer. If you want to make the transfer, it’s best to check with your bank.

How Do I Check the Balance on My Payroll Card?

You can check the balance on your payroll card at an ATM, through the app connected to the card, or by visiting the website of the payroll card provider. Many providers also enable users to call a toll-free number and check their balance.