Payroll debit cards: 3 keys to avoiding unpleasant surprises
August 22, 2008 by Bill MeltzerPosted in: Compensation, In this week's e-newsletter, Latest News & Views
Some employees find payroll debit cards more convenient than depositing paper checks. But shop around carefully if you’re considering this option.
The programs vary widely from one to next. As you compare the options, you’ll find significant differences in cost, convenience (both to your company and to employees) and the cards’ level of consumer protection. Here are three key questions to ask:
1. Is the vendor financially sound?
Under the terms of some vendors’ programs, your employees could lose some of their money if the vendor goes out of business. Your company may be on the hook for the difference.
The U.S. Consumers Union says your best bet may be a bank program set up with FDIC insurance. These programs cost a bit more, but every penny is safe.
2. Does it provide theft protection?
Find out if the card provides full Federal Regulation E protection (the same as a bank debit card) if it gets stolen. Otherwise employees or your payroll department could be unpleasantly surprised.
Example: Even some of the “zero liability” protection policies have some limits. One vendor’s program covers only one unauthorized card use per year. So if the card gets stolen and fraudulently used three times, the policy only covers the first use.
Another program doesn’t guarantee protection if a stolen car is used at an ATM or outside its network of retailers. Retailers choose whether or not to participate.
3. Are there hidden fees?
Ask for a list of all fees the vendor might charge your firm and employees. Common ones include:
- monthly service fees
- fees for exceeding a certain number of transactions
- ATM transaction fees (the ATM owner may also apply a surcharge)
- card inactivity fees, and/or
- fees to replace lost or stolen cards.
Also, your contract with the vendor should specify that no fees can be added or increased without your approval.
April 18th, 2008 at 9:54 am
Those are all great tips, however they do not go far enough to address the issues employers and employees can face.
FDIC Insurance is a given. However, the employers need to ask if each employee has an individual FDIC insured account. If the bank or payroll card company uses a single account with several sub accounts for each employee they can easily surpass the FDIC $100,000 amount.
Don’t assume. Bigger is better or if it’s from a bank it meets all state regulations. Several of the largest processors use banks with a very small footprint. What precautions have they taken to insure the funds are secure in the event of closure, fraud, etc? Several major banks clearly state in their literature or website it is your responsibility to ensure your program is compliant with state regulations. While this is a true statement, they do not tell you that the program they offer will not meet the regulations of several states.
Federal and State governments are focused on enforcement of regulations regarding low wage workers. What are you risking in fines and penalties by using a program that is not compliant with the law?
Fees and Charges; It is important to see a fee schedule; however it is equally important to understand the specifics of items on he schedule. For example many companies offer the first transaction free, however what your employees later discover is if they check their balance at an ATM they just used their first free transaction and now must pay the stated price to receive their funds “Free and Clear” as required in most states. The “Free and Clear” option offered by many companies requires the employee to do one of more of the following tasks;
1-To go to a specific branch or retailer 2- Request a check via the mail or 3- call customer service to get an authorization then write a blank check for the correct amount in the correct manner then travel to a designated retailer who calls to verify the accuracy and authorization is correct before cashing the check. How beneficial are these “Free and Clear” options for your employees?
A final concern is how to get the full benefit of the payroll card saving when many states still require delivery of the paystub at the time and place of employment in paper form. While eliminating checks is a substantial saving, if you have multiple locations to overnight checks and stubs to now, your real saving will be realized by solving this issue.
Education is the key to satisfaction and generating savings for you and your employees