Payroll cards are gradually becoming the new trend for small businesses, as it’s an easy way for employees to receive money without visiting the traditional brick-and-mortar bank.
This is ideal for individuals who cannot (or choose not to) open a bank account.
However, several questions arise regarding how to transfer funds from these payroll cards to a bank account, also, if payroll cards are the best option since they are similar to traditional debit cards.
Not to worry, you’ll get answers to these questions as you read this article.
Table of contents
- What is a Payroll Card?
- How does a Payroll card work?
- Advantages of a Payroll Card
- Disadvantages of Payroll Cards
- Is a Payroll card right for you?
- Payroll Card Providers
- How to transfer money from a payroll card to a bank account
- Payroll Debit Card Regulations
- Alternatives to Payroll Cards
- Bottom Line
- Related Articles
- References
What is a Payroll Card?
A payroll card is a prepaid card in which an employer loads employees’ wages and salaries without setting up a bank account.
They function like debit cards, allow employees to access their paychecks, and can be used to withdraw cash or make purchases.
Payroll cards are good options for small businesses with employees who don’t have bank accounts or don’t have a lot of banking options in their location.
The movement towards pay cards instead of other forms of payment continues to increase. According to research from the Mercator Advisory Group, loads on payroll cards reached $40.3 billion in 2017, but that figure is projected to grow to $50.9 billion in 2022.
As an employer, providing a payroll card may be cost-effective for you depending on the payroll card service you sign up for. Printing and handing out checks can be expensive, and certain payroll companies may charge extra for things like direct deposit.
As an employee, it is important to know the other fees associated with payroll cards as they are not traditional debit cards.
Although it is a great option for employees with no bank account, you’ll still 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.
How does a Payroll card work?
When an employer decides to use payroll cards for his workers, the number that will be preloaded to the card is the amount that will normally be in their paycheck.
With the payroll card, employees can use it to pay for regular bills and expenses just like they would if they received their paycheck the traditional way.
More so, pay cards can be used to get money from an ATM, which makes it similar to traditional debit cards.
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Advantages of a Payroll Card
Since pay cards are similar to traditional debit cards, they have the following benefits:
- For employers, payroll cards are cheaper and more convenient ways to pay workers.
- They are easy ways employees can access their paychecks without having a bank account.
- If a payroll card is lost or stolen, it can be easily replaced (for a fee)
- There is no risk of debt or financial liability, as the card is a debit card and not a credit card.
- 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 and with ease.
- It makes it easy to receive a payment if you don’t have a bank account.
Disadvantages of Payroll Cards
The downside to using payroll cards include;
- Employees who use payroll cards may be hit with fees when they access an ATM or use their cards for purchase.
- They don’t provide the same benefits as a bank account, like favorable interest rates.
- Payroll card users are charged for everything they do, which includes checking their balance.
- Unlike a direct deposit, pay cards can be lost or stolen.
- Depending on your industry, it may not be a good payment option
- Paying bills with a payroll card wouldn’t let you earn cashback like you can with a rewards credit card.
- Payroll cards are debit cards, so they come with fewer consumer protections than credit cards with zero fraud liability.
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Is a Payroll card right for you?
Before accepting payments from someone with a payroll card, you should know that your employer cannot legally present it as the only payment method.
According to the Consumer Financial Protection Bureau (CFPB), they must give you at least one alternative payment option.
More so, the state law determines which options your employer has to offer to you and if they have to obtain your written consent before paying you with a payroll card.
The CFPB’s prepaid rule, which was enacted in 2019, also requires employers to present you with disclosures before you start accepting payment with a payroll card.
Although payroll cards are a convenient way of receiving payments, it’s still important that you know your rights and other options available to you.
Most especially, if you don’t have a bank account and don’t want to open one, a payroll card can be the best option for you.
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Payroll Card Providers
There are several payroll ard providers available for small businesses. Some payroll providers offer payroll cards as a way to compensate employees.
If you’re working with a major payroll provider, talk with your representative about the effect of paying through payroll cards.
Regardless, according to the American Payroll Association, there are a few payroll card providers to consider.
#1. Money Network
Money network offers payroll cards and an intuitive online experience to manage your payroll card offering.
The company offers enhanced security, flexible deposit options, limited liability, and zero-liability protection. Its zero-liability protection means employees are covered if something happens to their payroll card.
Money Network has over 20 years of experience as a prepaid debit processing company, and all their funds are secured with the FDIC.
Click on the button below to learn more
#2. U.S. Bank
U.S. Bank provides payroll cards to small businesses, making it one of the few major banking institutions that back payroll card initiatives.
Its payroll card initiative is called Focus, and it includes fraud protection, online purchasing, and 100% electronic payments.
In addition, it provides text and email alerts, cash-back rewards programs, savings account features, and a mobile app.
U.S. Bank is one of the key players in the financial industry, so you have nothing to be worried about.
Click on the button below to learn more.
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#3. Wisely
Wisely is a payroll card provider backed by ADP, one of the largest payroll processing and HR management companies in the United States.
The company offers fee-free cash access at ATMs and banks as well as cashback at retailers. This is a unique feature, considering that one of the major downsides to payroll cards is the never-ending fees.
Also, Wisely provides its users with apps where they can manage funds. It also offers multiple sources for funding so you can connect to part-time paychecks.
Click on the button below to learn more.
#4. Netspend Skylight ONE Card
Netspend is one of the largest payment programs in the U.S. It offers unique features such as flexible enrollment, electronic reporting, and an online portal where employees can view online deposits and wage statements.
As a full-service partner, this company also helps small businesses to implement and manage payment card programs.
Find out more Netspend has to offer by clicking the button below.
#5. Rapid! PayCard
Rapid! PayCard offers lots of features in its payroll service. One of the major features is its 100% e-payroll solution for its clients.
Several distribution options include e-wallet payouts, digital checks, and a host of payroll cards for your employees to choose from.
More so, it offers instant payment and electronic payroll delivery at zero cost for employers, and lots of other convenient features.
Click the button below to find out what they have to offer.
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How to transfer money from a payroll card to a bank account
Transferring money from your payroll card to a bank account can be easy or complicated, depending on your payroll card provider.
Unfortunately, there isn’t much information on how to easily transfer funds from your payroll card to a bank account.
Some companies build it into their offerings, while with others, you may have to speak with your bank or payroll card provider.
Conversely, payroll cards are the best option for workers with no bank account. While direct deposits are best for employees with a bank account.
If your employer offers you a payroll card, there must be other options, such as a direct deposit or paper check.
Different government laws require employers to provide multiple payment options.
In general, if you want to transfer money from your payroll card to your bank account, it’s best to speak to your bank officer or employer. Bear in mind that you may have to pay a fee to make it happen.
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Payroll Debit Card Regulations
Although payroll cards are different from prepaid debit cards by definition, the laws backing them are still the same.
According to the Consumer Financial Protection Bureau (CFPB), Card issuers are required to disclose their fee structure clearly. You also have protections in place if your card or PIN is lost or stolen and there are fraudulent charges.
Also, Prepaid and payroll card providers must give at least 21 days of notice in writing.
If you don’t want a Visa payroll card or whatever your employer is offering, you aren’t required to use one. Employers must give you at least one alternative to payroll debit cards.
More so, some states may have stricter laws regarding payroll debit cards. For example, in Illinois, employers must offer at least a paper check as an alternative to debit cards.
Alternatives to Payroll Cards
According to Credit cards, the most common alternatives to payroll cards include a direct deposit in your bank account or a paper check.
These options can make it easier to manage your payments on your own terms, but you will need a bank account to accept payment through direct deposit.
Fortunately, some bank accounts don’t require any fees and options with fees that are easy to avoid.
In fact, many of the best checking accounts come with easy online access, no minimum balance requirements, a free debit card, and plenty of other perks that can make traditional banking more convenient.
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Bottom Line
Payroll cards are a great way to receive payments from your employers. Although it’s not the best option, it’s the most convenient for those without a traditional bank account.
More so, if you have a bank account, and want to transfer your funds into it, then you’d need to contact your bank officer or employer.
All the best!
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