Should You Offer Payroll Cards to Employees? |  Benefits of Payroll Cards

Last Updated on June 5, 2025

If your workforce includes employees without bank accounts, those who travel frequently, or those in remote areas, payroll cards can reduce processing costs while providing convenient access to wages.

Table of Contents

• What Is A Payroll Card?
  
• Benefits Of Payroll Cards For Employers And Employees
• Drawbacks And Fees To Watch Out For With Payroll Cards
• Legal Requirements And Employee Rights For Payroll Cards
• Best Practices For Employers

What Is A Payroll Card?

A payroll card is a prepaid debit card that an employer loads with an employee’s wages each pay period. It provides a way for workers without checking accounts to access their pay electronically, avoiding paper checks.

Direct deposits are less expensive overall, but they’re of little use to employees without bank accounts. By one estimate, nearly 25 million Americans, representing about one-fifth of households, lack a bank account or are underbanked, leaving them with limited options to access their wages.

Benefits Of Payroll Cards For Employers And Employees

Payroll cards offer several key benefits:

• • Lower Costs for Employers: Producing a paper paycheck typically costs about $1.75, while electronic deposits cost roughly 25 cents. Payroll cards reduce administrative and printing expenses.

  • Convenience for Employees: Wages are automatically loaded on payday, and employees don’t need to visit a bank or check-cashing location.

  • Consumer Protections: Many cards include protections similar to credit or debit cards, such as fraud liability limits, purchase insurance, and even cash-back rewards.

Drawbacks And Fees To Watch Out For With Payroll Cards

While convenient, payroll cards can carry multiple fees that reduce take-home pay:

• • ATM withdrawal fees

  • Point-of-sale purchase fees

  • Balance inquiry fees

  • Overdraft fees

For example, an employee earning minimum wage could lose the equivalent of an hour’s pay each pay period due to ATM or purchase fees.

In addition, payroll cards may not receive full protection under the Electronic Funds Transfer Act (EFTA) unless linked to an individual account. The EFTA grants users the right to:

• • Dispute unauthorized transactions

  • Limit liability for stolen cards

  • Receive funds back within 10 days in case of verified theft or bank error

Legal Requirements And Employee Rights For Payroll Cards

Employers must comply with specific rules when offering payroll cards. Employees must be:

• • Provided with clear, written disclosures of all applicable fees

  • Able to check balances online or by phone

  • Given access to a 60-day transaction history in writing or online

• • Able to report lost or stolen cards with limited liability for fraudulent charges

Critically, payroll cards cannot be the only form of payment offered. Employees must be allowed to choose alternatives like paper checks or direct deposit. Forcing payroll cards as the only option could lead to legal trouble, as seen in investigations by the New York Attorney General.

Best Practices For Employers

Before implementing a payroll card program, Consumers Union recommends the following best practices:

• • Be sure the payroll card company is financially sound. If a provider goes out of business, your employees could lose the money remaining on their cards.
  • Insist on consumer protection equal to bank debit cards.
  • Negotiate no fees or low monthly fees for employees, or pay them for the employees. Some states require that employees be able to access their pay without fees.*
  • Identify and restrict other fees. Some issuers charge fees for each minute of customer service, for loading wages onto the card, for exceeding a specified number of transactions, for replacing lost cards and more.
  • Review the options the card offers, such as paying bills directly or transferring money into another account.
  • Review the overdraft policy. Some companies charge a $29 overdraft fee.
  • Give employees the choice of receiving paper checks.
  • Require privacy protection. The issuer should ensure that it will not sell or share information.
  • Choose a card that offers information in languages other than English.
    
    Note: If payroll card fees reduce an employee’s pay below minimum wage, especially for hourly or minimum-wage workers, your company may be at legal risk. Speak with your accountant or legal advisor to ensure full compliance.

©2025 - Content on this blog is intended to provide helpful, general information. Because laws and regulations evolve, please consult an HR professional or legal expert for guidance specific to your situation.