Should You Use Payroll Cards? Learn the Pros and Cons

Payroll cards are a growing trend in small business: About 14 million payroll cards were in use in 2017. And for good measure – payroll cards fill a very real need. According to a 2017 FDIC study, almost 9 million U.S. households don’t have bank accounts. Payroll cards provide easy access to paychecks without the need for a bank account or banking relationship. This can be crucial for many Americans who cannot (or choose not to) open a bank account.

What is a payroll card?

Payroll cards allow employees to access their paychecks without setting up a bank account. They function like debit cards: Payroll cards are loaded with a paycheck each pay period and can be used to withdraw cash or make purchases. This can be an advantageous tool for small businesses with employees who don’t have bank accounts or don’t have a lot of banking options in their location.

Depending on which payroll card service you sign up for, it may be more cost-effective to provide a payroll card option to your workers. ing and handing out checks can be expensive, and certain payroll companies may charge extra for things like direct deposit.

From a worker’s perspective, it’s important to understand the different fees associated with payroll cards, as they aren’t exactly like traditional debit cards. While it can be a great option for employees with no bank account, you’ll have to pay some fees, like monthly maintenance fees, ATM withdrawal fees, balance inquiry fees, fund transfer fees and account closure fees. The exact fees will depend on which company you’re working with.


Payroll card pros and cons

Payroll card pros

  1. Payroll cards are a simple, easy way to access your paychecks without having a bank account.
  2. If you lose your payroll card or it’s stolen, it can be easily replaced (for a fee, of course).
  3. It’s a convenient option. There’s no need to go to a bank to cash a check or check in to see if your deposit has hit your account. You can access your funds immediately.
  4. Payroll cards are easily replaced.
  5. There is no risk of debt or financial liability, as the card acts as a debit card and not a credit card.

Payroll card cons

  1. You don’t get the same benefits of a bank account, like favorable interest rates.
  2. It may cost you to view your balance.
  3. While easily replaced, your card can technically still be lost or stolen, which is not an issue with direct deposit.
  4. There are additional fees to use your card.
  5. Depending on your industry, it may not be a good payment option.

Payroll card providers

There are several payroll card providers for small businesses. Some major payroll providers offer payroll cards as a way to compensate employees. If you’re working with a major payroll provider, talk with your representative to determine what payment via payroll cards would look like for your business.

In terms of other options, there are a few payroll card providers to consider, according to the American Payroll Association.

  1. Money Network
  2. Netspend Skylight ONE Card
  3. rapid! PayCard
  4. U.S. Bank
  5. Wisely

How to transfer money from a payroll card to a bank account

Transferring money from your payroll card to a bank account can be simple or complicated, depending on which payroll card provider you choose. Surprisingly, there isn’t a lot of information out there on how to transfer funds from a payroll card to a bank account. Some services build it into their offerings, while with others, you may have to speak with your bank or payroll card provider.

Payroll cards are ideal for workers with no bank account, while direct deposit is a better option for workers who need immediate access to funds through a bank account. If your employer offers you a payroll card, it must offer you either a direct deposit or paper check option as well. There are several labor laws that require employers to provide multiple options. If you have a payroll card and you need to transfer funds to your bank account, it’s best to talk to your provider or employer. Keep in mind that you may pay a fee to transfer money to a bank account.

Bottom line

Payroll cards are an ideal option for small businesses looking to save money on processing payroll. They are also a vital tool for employees who don’t have bank accounts. There are several payroll card providers. Most of the large payroll processing companies offer small businesses a payroll card option. There is a host of third-party companies that can provide independent service, should your organization process payroll manually or work with a partner that doesn’t offer payroll card services.

From an employer perspective, payroll cards can be a great way to securely compensate your employees while saving money on direct deposit fees and paper check overhead.

As an employee, you should be aware of the fees and conditions associated with payroll cards. You should use a payroll card that provides some kind of online portal or mobile app.

There are several pros and cons to using payroll cards, but, as usual, the best option for your business depends on your workers, your business’s needs, and overall cost.

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