Payroll cards offer convenience at lower cost
Stein Mart's Hawkins said the transition from payroll
checks to pay cards went much more smoothly than the company anticipated.
They brought in a third-party firm to create and deliver a presentation
to Stein Mart's employees around the country on how the new program
"There was absolutely no resistance -- we were
stunned," Hawkins says. "We received a question from one
associate in one store, that was it." The real payoff came
when hurricanes Katrina and Rita devastated the Gulf Coast; Stein
Mart was able to pay employees without interruption because it had
the program in place, Hawkins says.
Cautions on fees
One of the biggest drivers behind the growing popularity of payroll cards is that both Visa and MasterCard began to back them in recent years. By branding the cards under Visa and MasterCard logos, users have access to their signature-based debit networks at retail locations in addition to the PIN networks.
While payroll cards are a better deal for both workers and employers on many levels, Consumers Union cautions both sides to ask some tough questions before adopting them as the preferred means of distributing wages. CU advises companies considering payroll cards to ensure that the company issuing the payroll card is financially sound.
Employees are advised to make sure the cards have
the same consumer protections afforded debit cards tied to personal
bank accounts. Federal law protects consumers with bank accounts
from fraud and loss if their debit cards are lost or stolen. The
Federal Electronic Fund Transfer Act will extend these protections
to payroll cards, but not until July 1, 2007.
Fees may also be an issue until all states put regulations
in place. Payroll-card issuers may charge a variety of fees, from
a basic monthly maintenance fee to fees for inactivity or fees for
using the card at an ATM beyond an allotted number of withdrawals.
Each provider's fee structure is different, so employees are urged
to press their employers to shop around for the best deal or have
the option of opting out in favor of a paper check.
James A. Ambrosio is a freelance
business writer based in Trenton, N.J.