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Pros and Cons of Paying Your Employees with Pay Cards

May 15, 2015 | posted by Adrienne M. Onorato
Pay cards

There’s not a one-size-fits-all payment program appropriate for all organizations. Learn about the pay card alternative and if it would be a welcome offering to your small business employees.


It is no secret that direct deposit is a convenient, widely accepted method for employees to receive their paychecks each payday. Most employers would probably prefer if all of their company would opt in to direct deposit, but for whatever reason, do not have 100% enrollment. So what can you do if your organization wants to be all paperless in that regard? Consider introducing pay cards as a complement to direct deposit.

Pay cards, or reloadable payroll debit cards, are an effective alternative to traditional paper checks that have benefits for small businesses and their employees. This way, employees who do not have bank accounts or credit cards, whether by choice or ineligibility, still have access to online shopping, are able to make automatic bill payments, and make one less stop at a check cashing store each pay period.


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Benefits of pay cards:

  • Cost-effective for employerPay cards have minimal administrative burden: they are issued once and then virtually reloaded each payday. For each pay card that is reloaded each pay period, that is one less paper check, translating to a cost savings on processing, paper, ink, and postage.

  • Cost-effective for employee – Nearly 60 million people in the U.S. are unbanked, which limits their ability to receive direct deposit or make online purchases. By having a pay card option, employees save money by no longer having to incur check cashing fees, and they save time from standing in long bank lines or waiting for a check to clear. With the pay card, an employee has the ability to pay bills online or via auto-pay with his or her debit card number and can conveniently, and immediately, use funds at an ATM or a point of purchase.

  • Security Pay cards are backed by the FDIC and, because of that, are a lot more secure than plain cash. For instance, the funds are PIN protected so if a card is lost, the funds can be accessed or recovered. This added layer of security helps employers by lessening the chance of fraud with forged or stolen paper checks. There is also comfort knowing that when the employee’s paycheck has to be mailed to his or her home or sent to another worksite location, the funds automatically go to the pay card instead of the paycheck possibly ending up in the wrong hands.

  • Digital delivery – Like direct deposit, employees with pay cards no longer have to be physically present at their place of employment on payday when it’s not their shift, plus they can expect to be paid timely even in the event of a blizzard, hurricane, or other natural disaster that may cause their business to be closed or not easily accessible. If the company is embracing a remote workforce, it’s also helpful that the employee can work from home and still get paid come payday.

  • Transparency – For employees who are looking to develop their money management skills, but do not have direct deposit, having a pay card awards them access to monitor account records, statements, transaction histories, and usage to better monitor their budgeting and improve their financial health.


    Things about pay cards to be cautious of:

    As great as pay cards sound, they do come with rules and fees an employer should keep in mind.

  • Employee’s choicePay cards cannot be required by an employer as a condition of employment nor can they be the sole method of paying wages. Federal law mandates that employers continue to provide an alternative to the reloadable card option, including direct deposit or paper checks.

  • “Free and clear access” – Any payroll card program must guarantee employees the ability to withdraw their full amount of funds without incurring any fees at least once each pay period. Otherwise, it becomes a question of whether they are receiving their full earned wages.

  • Fees, fees, fees – Although pay cards can be cost-effective, if the employee doesn’t have a bank account, he or she most likely will still need to visit a bank or ATM for most card services, which may come with fees. While the government is looking to introduce legislation that restricts the fees that come along with issued cards, some programs may be more fee-happy than others. It is important for the employer to know what exactly they are offering and also for the employee to be informed of all potential fees. Employees who opt in to their employer’s pay card program should thoroughly review any paperwork that comes with their card because, depending on the provider, they could face charges for withdraws, overdrafts, check balances, denied transactions, ATM surcharges, or a monthly/annual maintenance fee.

    More than ever society is evolving to be more paperless, specifically in the realm of monetary transactions. With the increasing use of debit and credit cards and the rise in popularity of online payment services such as PayPal, Apply Pay, and Bitcoin, one could argue the days of people driving to the bank to deposit or withdraw “green-bricks” are numbered, and the same may be true for payroll checks. Pay cards are not for everyone, but despite the risks, the bottom line is that introducing a pay card program to your employees is one effective way to accommodate all of your employees, leading to improved satisfaction and retention.


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    Pay cards are just one convenient method to compensate your employees in a timely manner. Call us at (856) 667-6225 to add pay cards to your existing Abacus Payroll service plan or to find out how we can customize a payroll quote for you.

    About the Author: Adrienne M. Onorato

    Adrienne is Director of Marketing and Business Development for Abacus Payroll, Inc. and Alloy Silverstein Accountants and Advisors. Recently named a "20 Under 40" by South Jersey Biz, she is an active member of INPACT Americas, the Association for Accounting Marketing, and several local civic and charitable organizations in the Greater Philadelphia Region. For more information on how the Alloy Silverstein Group can help your business succeed, send us an email.