Alternative to Paychecks

Did you know that not everyone in America has a bank account? To many of us, that have been proud bank account holders for numerous years, we don’t realize is that a bank account isn’t typical to everyone.

A recent study from the Federal Deposit Insurance Commission (FDIC) found that 17 million Americans don’t have a bank account or a credit card. Reasons ranged from not having enough money to merit one or the cost was too high to keep open.

How can those lacking a bank account expect to turn a paycheck into cash?

There are check cashing places everywhere. Unfortunately, these places take advantage of their customers. As one of the sole places to give cash for checks, the fees and interest taken from each check is substantial. Until now, these were the only places accountless people could turn to.

Fortunately, an upcoming trend is pay cards or “payroll cards”. Each employee is issued a plastic bank-like card that can be reloaded each time he or she is issued a paycheck. This allows employers to skip the usual paper copy. The card is used exactly like a bank card, with pin number, money deposits, and withdrawals. It can be used anywhere credit or bank cards are taken.

The card not only benefits those without a bank account, but everyone. Checks can no longer be lost or stolen. There’s no more waiting in line to deposit or cash a check. Your money is FDIC insured and instantly available. No more waiting for checks to clear or be processed!

In September Wal-Mart, the nation’s largest private employer, switched to payroll cards for all employees who did not have direct deposit. The company is using MasterCard payroll cards, which offered the lowest rates of similar card. The first ATM transaction is free per pay cycle. Every other transaction will cost the card holder $2.

The payroll card is also popular on The Ohio State University campus. The card is backed by JPMorgan Chase. It’s a away for students, who work on campus, without bank accounts to receive direct deposits to their cards. Unfortunately, the cardholder, like Wal-Mart cardholders, is only allowed one free ATM transaction.

However don’t assume that all payroll card carriers are the same. Some extra fees that could be added to your card are:

• a monthly fee
• a fee after a certain number of transactions
• a fee for each ATM transaction
• surcharge to the ATM owner
• a POS fee for use at a point of sale such as a store
• an inactivity fee
• a fee to replace the card
• a fee when funds are put on the card (load fee)
• a fee to get the funds out by check if the employee doesn’t like the card

Its very important to get all the facts prior to agreeing to the payroll card. What do you think of payroll cards.

By Stephanie Colangelo, Flexhire Associate