From time to time, a poorly implemented payroll card program comes under fire in the media. Well-meaning, socially conscious blogs are often the first to report on these stories, in which they frame the employer as a predatory gatekeeper to employee wages. There are fundamental problems with how these stories are reported, which affects the way readers understand the purpose of a payroll card. The two most common misconceptions about paycards:
MISCONCEPTION #1: "It's too difficult for employees to access wages on a payroll card." In these cases, the card is referred to by critics as a temporary storage unit for a paycheck, from which employees must remove the money as cash to access it. If that were true, paycards would be no better than paper checks! The reality is that the card is a replacement for a traditional bank account—employees can make point of sale transactions, get cash back, and pay bills online at no cost. Additionally, all states that have passed paycard legislation require that employees can make one bank teller cash withdrawal per paycheck, in which they can withdraw their full wages from the card at any bank at no cost. This means that, in order to remain in compliance with those state laws, all paycard companies offer this option.
MISCONCEPTION #2: "It costs employees a lot of money to use their payroll cards." Paycards are only costly when used incorrectly. Usually ATM fees and insufficient balance fees are referenced in these conversations. What doesn’t get mentioned, however, is that there is no cost for cash back; that traditional bank accounts charge fees for out-of-network ATM use as well; and that a traditional bank account overdraft fee is 72 times higher than most paycards’ $0.50 insufficient balance fee. The most important component here is the element of cardholder education. Cardholders who are educated how to avoid paycard fees and best use the card are able to use it as a bank account replacementwithout incurring fees, but those who are not educated about the card assume that the ATM is their only option and end up amassing ATM fees.
THE CAUSE: In general, these attitudes typically stem from miseducation at several levels. Typically, paycard programs are implemented by well-intentioned HR Managers or Payroll Directors who have little day-to-day interaction with the employees who are actually using the card. As payroll cards move down the chain, from director to regional manager to shift supervisor, the message gets diluted until a new hire is given a card with little direction on how to properly use it. The new hire, who is probably used to receiving a paper check, treats the card as if it were a barrier to their hard-earned paycheck.
THE SOLUTION: The challenge, as a paycard company, is to get that messaging and those good intentions through to every cardholder, despite the telephone game. The lawsuits in the media are examples of paycard companies who have failed to rise to this challenge, by not finding ways to educate their cardholders. At SOLE, we pride ourselves on our emphasis on the cardholder education process, from the 12 different instructive emails every new cardholder receives, to our interactive, educational activation line, to our social media messaging. Regardless of what message the cardholder receives from the person who gives them the card, they will also receive repeated SOLE messaging that educates and informs them on how to best use a payroll card.