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. Open Loop Card

    A credit card, debit card or gift card that a consumer can use ...
  2. Credit Card Encryption

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

    A card issued by a financial institution that is preloaded with ...
  4. Carding Forum

    A website dedicated to the sharing of stolen credit card numbers. ...
  5. Cash Card

    A cash card can be any card that you can insert into an ATM or ...
  6. Secured Credit Card

    A type of credit card that is backed by a savings account used ...
Related Articles
  1. Personal Finance

    The Dangers of Getting a Paycheck on a Prepaid Debit Card

    Receiving your paycheck on a prepaid debit card may seem like a boon until you discover all the fees that can come with it.
  2. Personal Finance

    8 Ways To Avoid Getting Burned By Prepaid Debit Cards

    These cards have many differences from traditional debit and credit cards that can cost you money if you don't know what to watch out for.
  3. Personal Finance

    How To Find The Right Prepaid Debit Card

    Prepaid debit cards are becoming increasingly popular. Here are some tips for choosing the right prepaid debit card.
  4. Personal Finance

    Credit vs. Debit Cards: Which is Better?

    Be strategic about the card you choose
  5. Personal Finance

    3 New Types Of Credit Cards To Look For

    These three types of credit cards are becoming popular with customers looking to pay less fees and build up their credit scores.
  6. 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.
  7. Small Business

    How to Use Small Business Credit Cards

    A small business credit card can be a convenient way to increase your company's purchasing power, but must be carefully managed.
  8. 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.
  9. Personal Finance

    How Many Credit Cards Should You Have?

    National stats indicate most consumers have three or more cards - are you one of them?
  10. 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.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. What are the pros and cons of digital gift cards (e-gift cards)?

    Examine the pros and cons of gift cards. Learn about protection in case of loss, monitoring spending by teens and wasted ... Read Answer >>
  4. How do prepaid debit cards work?

    Learn about how prepaid debit cards work, including where they are accepted and how the financial part works like a checking ... Read Answer >>
  5. What transactions cannot be made using prepaid credit cards?

    Find out about the transactions that are restricted when you use a prepaid credit card, and find out about other ways to ... Read Answer >>
  6. Why should I register a prepaid credit card?

    Explore reasons why registering a prepaid credit card is a good idea. Learn about protection if the card is lost or stolen ... Read Answer >>
Trading Center