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5 Surprising Facts about Paycard Programs

Here are five facts about paycard programs and how they can benefit your business. They may surprise you.

Paycards, also known as payroll cards, have been known to elicit negative connotations due to media coverage of poorly implemented programs and resulting lawsuits. However, today's paycard programs are typically designed with the best interests of the employer and the employee in mind, helping them gain in popularity recently. Here are five facts about paycard programs and how they can benefit your business. They may surprise you.

1. Payroll cards are not just for the "unbanked."

While it’s true that paycards empower the "unbanked," employees with bank accounts can also benefit from enrolling in their employer's paycard program by using the card as a budgeting tool. Employees can divert an allotted amount of their paycheck to a paycard, making it easy to save funds for future vacations, holiday gift shopping, or other "fun money" purposes. Budgeting in this way is less risky than stashing or carrying large amounts of cash, which can be easily lost or stolen — potentially catastrophic during a vacation. Branded paycards can be cancelled at a moment's notice if necessary, but lost cash is gone forever.

Budgeting with the card can be taken a step further if an employee requests additional cards for family members or trusted friends. This can be a great way to provide college students with spending money while they are away from home, while giving parents the ability to see where the money is being spent.

2. Most paycard programs do not impose high fees on employers or employees.

Most modern paycard programs are designed so that employers and employees can avoid high fee schedules. Employers can sign up for most programs without incurring any additional charges. For employees, many programs have no monthly maintenance fee, and allow users full access to their funds free of charge through multiple channels, such as in-network ATMs, over-the-counter cash withdrawals at member banks, or fee-free check cashing. This is especially important for unbanked workers, who otherwise might have their paycheck eroded by fees imposed by check cashing services. Alternatively, most paycards can be used just like a debit card to make purchases anywhere debit cards are accepted.

3. Many programs offer instant issue options.

With many programs, employers keep an inventory of cards on site and issue them to employees as needed, enabling new employees to have a card in time for their first payroll. This is especially helpful when dealing with employees who are temporary or on contract, as there is no waiting period to get a card. They can even be issued to meet final pay requirements for terminated employees. This allows for a seamless pay experience.

4. Paycard programs save employers money.

Payroll cards can reduce costs for business owners in many ways, including reducing expenses related to producing and handling checks, postage for check delivery, and costs related to lost, stolen, or duplicated checks. Since paycard accounts are funded electronically, pay can be delivered even during times of emergency, such as a storm or a natural disaster.

Additionally, enrolling your company in a paycard program can support your company's "Green" image, since you are likely to cut down on paper checks.

5. Online and mobile services make program and account management easy.

Many paycard programs offer employers an online portal that allows them to manage all aspects of their program. Often, the online interface seamlessly integrates with payroll.

Employees will often have a portal to manage their account too, giving them 24/7 access to check balances, review transactions, view or print statements, or even participate in online bill pay. Many programs also provide account alerts; cardholders can arrange to have transaction alerts, deposit alerts, and balance updates in real time as emails or via text messages.

The new generation of paycard programs is gaining popularity among employers and their employees. Before deciding on a paycard program for your business, do your research to ensure you are choosing a program that was designed with your best interests — and the interests of your employees — in mind.

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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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