Ever since its creation, direct deposit has improved the lives of millions of employees the world over. Even in times where work is scarce, direct deposit can offer easy access to much-needed funds. However, what options are available for employees without a bank account?
If paper checks are out of the question, and the employee cannot or will not start a bank account, the next best solution is to offer employee pay cards. What are employee pay cards? How do they work? Why might someone prefer them over direct deposit? Here’s what you need to know.
What Are Employee Pay Cards?
First things first, let’s clarify what employee pay cards are. Employee pay cards, sometimes shortened to pay cards, are prepaid debit cards filled by the employer at each payday. Once the employee’s paycheck loads onto the card, they can then use it like any other prepaid debit card, or else withdraw funds from an ATM.
Their basic function is to serve as a means for employees without a bank account to access their pay without having to cash their checks or open an account. However, certain paycards for employees offer special benefits, depending on the employer.
Why Would Someone Receive a Paycheck on a Card?
We’ve already discussed the main reason why someone would receive a paycheck on a card: If they don’t have a bank account, then they cannot receive direct deposit in any other way. However, there are some other benefits to receiving a paycheck in this way, including:
- No credit checks or credit scores required to use them, unlike some secured credit cards
- Certain employee pay cards offer cash back at the grocery or convenience store
- Pay cards save employers money by reducing the number of printed checks
- Depending on the company, pay cards might get paid sooner than normal bank accounts
These are but a few of the reasons why an employee might choose to get their paycheck on a card like Green Dot. However, this is not without its drawbacks.
What Are the Cons of Using Employee Pay Cards?
While these pay cards can provide a valuable resource to the unbanked, they can have some serious drawbacks. Most employee pay cards have withdrawal or activity fees for any time that you use them. If you don’t use your pay card often enough, you might get charged for your lack of use. Worse, you might not be able to access your whole paycheck due to administrative fees.
Employee Pay Cards: Let’s Review the Basics
Returning back to the basics: What are employee pay cards? Employee pay cards are a method by which employers can pay their unbanked workers, allowing workers faster access to their paychecks and reducing the risks involved with paper checks. However, they can nickel and dime away from an employee’s hard-earned wages due to various fees involved. Despite this, they remain a popular way to receive a paycheck, even for those who have bank accounts.
If you’d like more information about pay cards or other ways to get paid, check out our blog for more helpful articles like this one!
