Payroll cards are debit cards issued to employees, and which are funded with employees’ net pay. These programs are growing in popularity, especially for employees who have no bank accounts of their own. Here are some considerations regarding the setup of a paycard program:
- Employees should not have to pay a withdrawal fee when they extract funds from an ATM (in some states, it is illegal to require employees to pay such a fee as part of their payroll payments). Accordingly, either have the company pay the ATM fee, or have the paycard supplier specify in its contract which ATM’s will offer free services to employees. It is also possible to set up an on-site company-owned ATM, which ensures that ATM fees will be free.
- Paycard issuers can impose a blizzard of fees, such as fees for an excessive number of paycard transactions, card replacements, a “load fee” (when a card is funded), and a monthly fee. First, be sure than none of these fees are charged to employees, only the company. Second, write limitations into the contract on increases in these fees, as well as the exclusion of as-yet unspecified fees. Also, it is helpful to model the full cost of all fees, using reasonable estimates of card usage, in order to determine which paycard program is the most economical.
- Some paycard issuers are not banks, so funds issued to paycards maintained by them could be lost if the issuer goes out of business. Instead, provide your employees with some extra security by only using paycards issued by a bank, which carries FDIC insurance on funds deposited with it.