Payroll Card

DEFINITION of 'Payroll Card'

A prepaid card onto which an employer loads an employee’s wages or salary each payday. Payroll cards are an alternative to direct deposit or paper checks. These cards are issued by major payment processors, such as Visa, allowing workers to use them anywhere credit cards are accepted. Users access their money from an ATM or cash back purchase in the same manner as with a traditional debit or credit card. Payroll cards are also reloadable, so a worker need not receive a new card each pay period.

BREAKING DOWN 'Payroll Card'

Payroll cards are offered by banks and employers as a service for low-income employees who do not have bank accounts. Payroll cards have advantages for both employers and employees. Employers save money by not having to issue paper checks. Employees who don’t have bank accounts get their money instantly, just like employees who use direct deposit, and they don’t have to pay check-cashing fees or worry about losing large sums of cash. Employees can use payroll cards like credit cards to pay bills and shop online, and since payroll cards are reloadable, employees don’t have to set up a new payment method every payday.

Employees can also use their payroll cards to get cash at an ATM, just like employees with checking accounts and debit cards can. Some payroll cards can also be used to get cash back at the point of sale at certain grocery stores and convenience stores. Employees don’t need to have a good credit score or any credit history to receive and use a payroll card, because it isn’t a credit card. It’s impossible to go into debt with the card, because there’s no credit available and no overdraft allowed. Payroll cards can be replaced if they are lost or stolen, without loss of funds. Employees can also add funds to their own payroll cards; they aren’t limited to only having payroll funds added by their employer.

A downside of these cards for employees is that they charge fees for certain transactions. Fees vary by issuer, but examples include a $5.95 monthly account maintenance fee for any month when the card is not used, a $9.95 fee to replace a lost or stolen card, a $0.50 ATM balance inquiry fee and a $2.50 out-of-network ATM fee. Traditional checking account users also incur fees for certain activities, however. It’s important for payroll card holders to understand that their cards may have fees and to learn what actions will trigger those fees so they can avoid them. If the fees are too high, the employee can opt to be paid by another method.

 

RELATED TERMS
  1. Debit Card

    An electronic card issued by a bank which allows bank clients ...
  2. Open Loop Card

    A credit card, debit card or gift card that a consumer can use ...
  3. Prepaid Cards Processor

    A company that processes transactions for prepaid payment cards. ...
  4. Credit Card Encryption

    Security measures used to reduce the likelihood of a credit or ...
  5. Credit Card

    A card issued by a financial company giving the holder an option ...
  6. Prepaid Credit Card

    A card issued by a financial institution that is preloaded with ...
Related Articles
  1. Personal Finance

    Credit vs. Debit Cards: Which Is Better?

    Be strategic about the card you choose
  2. Personal Finance

    Credit, Debit And Charge: Sizing Up The Cards In Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.
  3. Personal Finance

    Take Control Of Your Credit Cards

    The plastic in your wallet doesn't have to hurt your finances. Learn how to manage it responsibly.
  4. Personal Finance

    How Many Credit Cards Should You Have?

    Having several credit cards provides many benefits. Here are a few factors to consider when you’re deciding how many credit cards you need.
  5. Investing

    Prepaid "Credit" Cards: Convenience At A Cost

    These cards offer convenience and security, but are they worth it?
  6. Personal Finance

    Review: Discover Credit Cards

    Discover it cards still offer generous rewards and no annual fee. But how generous depends on which card you end up with, and what your credit score is.
  7. Personal Finance

    Credit Card Or Cash?

    Credit cards are convenient to use, but not always the best choice. Here are 5 times you shouldn't pay with a credit card – and 5 times you should.
  8. Personal Finance

    Understanding Credit Cards

    Credit cards are a type of unsecured personal loan between the credit card issuer and the credit card holder.
  9. Personal Finance

    Terrible Credit Score? Try These Credit Cards

    When your credit is less than stellar you have fewer choices. But some are still better than others. Here's our read on which cards to get.
  10. Personal Finance

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
RELATED FAQS
  1. I have 3 credit card debts, how can I get them paid off the cheapest way?

  2. Do prepaid Credit Cards have monthly fees?

    Choose a prepaid debit card with a fee structure that doesn't eat away at the existing balance by considering how you intend ... Read Answer >>
  3. What are the differences between debit cards and credit cards?

    Learn how the major difference between a debit card and a credit card is where the money comes from when a customer makes ... Read Answer >>
  4. What is the difference between a prepaid credit card and a gift card?

    Although prepaid and gift cards are used in the same manner, a prepaid credit card can be used repeatedly, while a gift card ... Read Answer >>
  5. Where are secured credit cards accepted?

    Repair a damaged credit history or establish one by opening a secured credit card account with a collateral deposit into ... Read Answer >>
  6. How can I avoid paying unnecessary credit card fees?

    Examine different strategies for reducing fees on credit cards. Learn about the Consumer Financial Protection Bureau and ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center