Are Payroll Debit Cards Right For Your Business?

Are Payroll Debit Cards Right For Your Business?

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In lieu of paychecks, a number of businesses are choosing plastic — as in debit cards — to pay their employees. This move allows businesses to reduce their paperwork and make it easier for employees to tap their funds. Under this arrangement, employees can go to any bank ATM to withdraw funds without needing a bank account.

Businesses have been moving away from paper pay checks for years with some making automatic deposits to employee checking accounts. However, that option has presented a problem for some employees who are unable or unwilling to open a checking account.

With payroll debit cards, employees know when their accounts are being replenished and typically receive a receipt from the employer confirming deposit of funds. Employees can also log-in online to confirm their balance and transfer funds electronically to another account. Besides withdrawing funds at an ATM, employees can use their cards wherever credit cards are accepted.

As easy as this plastic arrangement seems, there are some drawbacks to consider including:

Cards are not accepted everywhere. Not every merchant accepts debit cards (or credit cards) which can limit the number of places where they can be used.

Fees may apply. Under some arrangements, employees may be able to make only one free withdrawal per pay period before fees kick in. That means for every visit to the store, gas station or other establishment, a charge could be made against the paycard.

Risk of loss. Like any card, a debit card can be lost. Usually, obtaining a replacement is easy, but it may not come quickly. Losing a card on a Saturday night means several business days could pass before a new one is issued. Employers should remind employees not to scribble their personal identification numbers on the card.

Paperwork problems. Employees may find it difficult to track their spending without a statement in front of them. Monthly statements need to be reconciled and funds carefully tracked throughout the month.

To answer the question posed in the title requires you asking yourself some questions first including: Are paycards preferable to the current method you use to pay your employees? Will your employees readily accept this change and, if so, what kind of training or preparation should you offer to get this program going?

Lastly, check with your state to see if paycards are allowable. Some states may require your business to follow certain rules including covering fees for ATM use.

Resources

CNN: The End of the Paycheck

Valiant: Ten Considerations in Selecting a PayCard Vendor

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Categories: Business Services