How Payroll Cards are Hurting the Average Worker

Employers are rapidly discovering the benefits of payroll debit cards and leaving the old paper paycheck method behind. Cost reduction on completing payroll and issuing paper checks, guaranteed on time payment and generous incentives from the card providers--sounds like a pretty good deal, right? Wrong. Everything comes with a price, but who is taking the hit?

Low wage, lower payout. That's how millions of employees feel about the new payroll debit cards. The New York Times reports that fees associated with the cards are causing employee earnings to dip below the minimum wage line. One McDonald's employee told the paper that just to access his money, he is being charged $40-$50 per month. He reported that "It's pretty bad. There is a fee for literally everything you do." One provider, for example, charges $1.75 to make a withdrawal from most ATMs, $2.95 for a paper statement, $6.00 to replace a card and a whopping $7.50 for 60 days of card inactivity.

Companies dispute the notion that payroll cards are depleting employee income, arguing that federal law states that employees must have access to their wages without incurring a fee, meaning that fee-free ATMs are provided. Employee interviews, however, concur that these machines are so few and far between that it is not realistic to access these machines regularly. There are also unavoidable fees for things like inactivity, balance inquiry, purchases using the card and more.

Federal law also states that employers must offer options aside from payroll debit cards such as direct deposit or paper checks. This, however, is often offered more in theory than in practice. Employees are enrolled automatically into the payroll card program and faced with a mountain of paperwork if they wish to opt out. Interviews have also discovered that many employees were not made aware of these other options.

After being short-changed for too long, low-wage earners are getting smart. To reduce fees employees have started withdrawing the balance of their paycheck once a month. Now, being supplied with the most modern forms of banking, people have re-adopted an old fashioned way of handling their pay---stacked in a shoe box in 10s and 20s. All in all, there should really be no price on getting paid.