Prepaid Cards Are Replacing Paychecks at More Companies

What's Hot

23 Upgrades Under $50 to Make Your House Look AwesomeAround The House

Trump Worth $10 Billion Less Than If He’d Simply Invested in Index FundsBusiness

Do This or Your iPhone Bill May SkyrocketSave

11 Places in the World Where You Can Afford to Retire in StyleMore

19 Moves That Will Help You Retire Early and in StyleFamily

What You Need to Know for 2017 Obamacare EnrollmentFamily

8 Things Rich People Buy That Make Them Look DumbAround The House

50 Ways to Make a Fast $50 (or Lots More)Grow

32 of the Highest-Paid American SpeakersMake

The 35 Two-Year Colleges That Produce the Highest EarnersCollege

5 DIY Ways to Make Your Car Smell GreatCars

Amazon Prime No Longer Pledges Free 2-Day Shipping on All ItemsMore

More Caffeine Means Less Dementia for WomenFamily

7 Household Hacks That Save You CashAround The House

5 Reasons a Roth IRA Should Be Part of Your Retirement PlanGrow

30 Awesome Things to Do in RetirementCollege

Beware These 10 Retail Sales Tricks That Get You to Spend MoreMore

9 Tips to Ensure You’ll Have Enough to RetireFamily

Prepaid payroll cards can make money for banks, and save money for the employers who use them, but they come with heavy fees for employees, many of whom are already earning low wages.

We recently wrote about a woman who sued her employer for paying her by prepaid debit card.

It turns out that payment method is pretty common, and not necessarily optional. In many instances, it’s at least the default choice, The New York Times says:

At companies where there is a choice, it is often more in theory than in practice, according to interviews with employees, state regulators and consumer advocates. Employees say they are often automatically enrolled in the payroll card programs and confronted with a pile of paperwork if they want to opt out.

Taco Bell, Walgreens, Walmart and dozens more offer this payment method, the Times says, and it’s gaining popularity with employers. Last year, $34 billion was loaded onto 4.6 million payroll cards. Those figures are expected to more than double by 2017.

Bank of America, Wells Fargo and Citigroup, among others, pitch payroll cards as convenient for employees. But the truth is, they’re cheaper for employers, the Times says, and some banks even pay employers, per head, to enroll people. Citibank pays the New York City Housing Authority $1 per person, the Times says.

The cards shift the financial burden of processing payment onto the employees. There are often fees for everything from an ATM withdrawal to a balance inquiry to inactivity and card replacement. Added up, these costs associated with just receiving a paycheck put many employees below minimum wage, the Times says.

Banks defend the fees by saying they’re cheaper than what someone who doesn’t have a bank would pay — even though fees are one good reason those people might avoid banking to start with.

“Someone cashing a payroll check for $500 would end up paying $15 at a 3 percent check-cashing fee,” Citigroup spokeswoman Nina Das told the Times.

My ears hear that as: We screw minimum wage workers more gently. (Though in some ways, banks are little different from payday lenders.) Do you think these cards are a fair way to pay someone for their work? Share your thoughts on our Facebook page.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: Sam’s Club Reveals Details of Black Friday, 5 Other Holiday Sales

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,710 more deals!