Payroll cards are debit cards into which employee's pay is deposited. They were created to provide funds for unbanked employees. Nevertheless, payroll card features have gradually expanded. The following are respects in which payroll cards are superior to direct deposit:
1. First payment is electronic. Paying an employee through direct deposit, the first payment to a new employee is with a check.
2. Data collection. The employer has to collect bank routing and account number information from employees. Direct deposit requires this as that information may be wrong or difficult to get. As the employer creates each account, this is not necessary for payroll cards.
3. Account lock down. Sometimes employees shut down their bank accounts. But they forget to inform the company that direct deposit payments must now be sent to a new location. Now employees cannot shut down the account.
4. Termination pay. There is no need for terminated employees to come back to the office to pick up a final check. They can be paid through a payroll card.
5. Information security. Personal banking information for payroll cards does not have to be retained by an employer.
6. Additional cards. Extra payroll cards for other family members are issued by some card providers. This allows them to withdraw funds in other cities. Moreover, this keeps the wage earner from paying wire transfer fees to send money to other family members.
7. Pay routing. Very often card users are allowed to automatically route incoming funds to personal bank accounts.
There are also additional profits of payroll cards over paychecks:
1. Check cashing time and cost. As funds are sent electronically you do not have to wait in a bank line. There is also no check cashing fee, though there may be an ATM fee.
2. Unclaimed property. There is no unclaimed property to track since there is no check that an employee may not cash.
Most employees will probably stay with direct deposit. Nevertheless, look for payroll cards to gradually encroach on the direct deposit and paycheck turf over the next few years.