Whether it is a gift card from Starbucks, a pre-paid toll road access card, or a bank card that taps directly to funds in an account, debit cards have become a prevalent component in many people's personal money management. Now, because these plastic "stored value cards" can essentially serve as cash equivalents, many companies are beginning to employ debit cards to pay their workers.
For some time now, businesses have preferred direct deposit over checks for paying workers' wages, but it cannot work if an employee does not maintain a bank account. So now banks across the country are promoting stored value cards, or in this case "Payroll Debit Cards," as an efficient method of dispersing wages to workers.
Payroll Debit Cards allow workers who do not have bank accounts to bypass check-cashing services and the fees they charge to convert checks into currency. Some Payroll Debit Cards also offer remittance features so workers can transfer money to other countries without paying international money transfer fees.
While Payroll Debit Cards offer tremendous benefits for companies' employees, employers should be aware that the cards can carry some risks for workers as well. Some Payroll Debit Cards are structured so that the cardholder pays a small fee every time the card is used at an automated teller machine or cash register. Consumer advocates suggest that employers, not workers, should pay such fees. If companies wish, they can structure their Payroll Debit Cards in a way that allows the company to absorb some of their workers' usage fees, reducing the amount the employee pays.
Also, because the plastic debit cards are accepted like cash at most major retailers, some consumer advocate groups are concerned that the cards encourage workers to spend rather than save. To address this, many card providers are considering adding saving options to their cards to increase their value to consumers.
Despite their perceived drawbacks, Payroll Debit Cards are being successfully implemented by many companies says Tony Grijalva, CEO of G&A Partners, a Houston-based Professional Employer Organization.
"G&A's client companies that have opted to use Payroll Debit Cards are finding them to be a convenient alternative to paper checks for their employees," said Grijalva.
As for the potential pitfalls associated with the cards, Grijalva says, "Ultimately workers will be responsible for the money they earn, whether it is through a debit card, a direct deposit or a check, so we encourage and help our client companies to promote healthy consumer habits through education in the workplace."
Grijalva added, "Payroll Debit Cards are a technological advancement to business practices. With any advancement comes accountability, but that does not mean businesses should not make the move."
For more information on Payroll Debit Cards, contact Anthony Grijalva, Jr. with G&A Partners at 713.784.1811, or via email at agrijalva@gnapartners.com.
