A paycard, also known as a payroll card, is a prepaid card offered by an employer to pay employees' net wages. These cards are a form of electronic payment that is deposited into a payroll account. A 2017 study by Aite Group revealed $42 billion in gross dollar volume was loaded onto 5.9 million active payroll cards. The use of the paycard is expected to grow to $60 billion, and 8.4 million active paycards will be used by 2022.
An employer deposits the net wages of an employee into a payroll account, which allows the employee to use the paycard to purchase items, withdraw cash and pay bills. These cards also eliminate the need for paper paychecks.
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These are some of the advantages of a payroll card for employees:
- No check-cashing fees
- Access to ATMs exactly like a prepaid debit card
- Immediate access to wages
Employees who don't have bank accounts can get their wages on a payroll card, which is helpful because the cards aren't linked to some bank's requirements of maintaining a minimum account balance. Employees who have bank accounts can also benefit from a payroll card, because there are no high monthly fees, bounced check fees or overdraft consequences. A paycard functions as a prepaid card until the amount on the card is depleted. A balance of funds can remain on the paycard and more pay wages can be electronically transferred again.
Employers cannot require employees to use a payroll card. If an employee is unhappy with how they are currently being paid, it's something to discuss with an employer. Employees can often choose to get paid using direct deposit or paper paychecks instead of payroll cards.
Employers have found many advantages for using these prepaid cards for payroll. The American Payroll Association states that an employer can save approximately $2.75 for each employee when they select an electronic transfer of funds using the payroll payment. The payroll card program takes only a few weeks to implement at a company. The time of the initial startup would include promotional material, card kits and training employees on the new program. The willing participants of a successful paycard program consist of the employer, the employee and the vendor.
These are some vendors currently participating in the payroll program:
- ADP Aline
- Global Cash Card
- Money Network
- Rapid Paycard
- Skylight Financial Netspend
- US Bank Focus
The advantages of payroll cards for employers include the following:
- Reduced or eliminated bank service fees
- No stop-payment fees for lost or stolen paychecks
- No longer issuing a final wage payment to a terminated or dead employee
- Minimal exposure to paycheck fraud
- Decreased cost to produce paper paychecks
The American Payroll Association provides state law, compliance and regulation for the payroll program. The responsibilities for the payroll program are upheld by the vendor and the financial institution issuing paycards. Both institutions comply with Regulation E, which requires disclosure of any fees that may result from the employee's use of a paycard.
Currently, the wage payment statutes in most states require employees to receive their full wages without a processing deduction fee. This is also an advantage for paycard holders because they normally receive a check-cashing fee from a bank or check-cashing service.