How Your Business Can Integrate Payroll Cards - FAQs.
Adoption of payroll cards as a form of wage payment has grown in the past few years. In a 2019 Bloomberg Tax & Accounting survey, nearly 30% of participating companies reported using payroll cards — a dramatic increase from 2% in 2015. Despite their popularity, employers and employees may still have questions about their use and benefits.
The following FAQs are designed to provide guidance for employers and employees considering payroll cards.
FAQs about Payroll Cards
Q. Why do companies offer payroll cards?
A. If a company has employees who are among the more than seven million households without a bank account, it’s likely not taking advantage of direct deposit, and manually issuing paper checks. A payroll card makes payday more efficient and cost-effective for employees and employers.
Q. What are employee requirements for payroll cards?
A. There are no requirements of employees. It is not necessary for them to have a bank account, and a credit check is not required.
Q. What benefits do payroll cards offer companies?
A. Industry sources estimate employers can save approximately $2 on each wage payment delivered electronically rather than by paper paycheck. In addition to saving money, employers save time and resources when they don’t have to issue and reconcile paper checks. Electronic deposits also eliminate the need to track and replace lost and/or stolen paychecks.
Q: What benefits do payroll cards offer employees?
A. Employees with payroll cards are eligible for direct deposit so they can immediately access their wages on payday. Additionally, payroll cards enable them the ability to shop or pay bills online, make purchases and withdraw cash at nationwide ATMs. They also help employees save money by avoiding costly fees associated money orders and check-cashing services.
Q. How can companies increase payroll card adoption among their employees?
A. When rolling out a new payroll card program, a company can increase enrollment by communicating employee benefits, which include direct deposit, the ability to shop or pay bills online, make purchases and withdraw cash at nationwide ATMs.
Q. Can companies use direct deposit with payroll cards?
A. Absolutely! In fact, that is a distinct advantage of payroll cards over paper checks. Direct deposit for payroll cards works just like direct deposit for bank accounts. For employers, direct deposit to payroll cards can help reduce risk of check fraud and simplify the reconciliation process; for employees, direct deposit to payroll cards provide immediate access to earnings on payday.
Q. How are lost or stolen payroll cards handled?
A. If an employee reports a lost or stolen card, the issuing financial institution will deactivate it and issue a replacement card. Depending on the company’s payroll card program, an instant issue option may be available that enables the employee to get their replacement card immediately. Usually there are “zero liability” protections for unauthorized purchases for lost or stolen cards.
Q. Are the funds on payroll cards insured?
A. Payroll cards have the same protections of the FDIC and NCUA that apply to bank accounts receiving direct deposits for a cardholder’s account for up to $250,000.
Q. Are companies or employees responsible for overdrafts on payroll cards?
A. Overdrafts are rare because payroll cards are prepaid debit cards where funds are required to be in an account for a purchase to process. A card can be overdrawn if an employee uses it to make a purchase before another purchase has been processed. In that case, the employee will have a negative balance until the next deposit.
Q. What fees can companies incur with payroll cards?
A. Fees can vary depending on the issuing financial institution and card network. Some fees can include program start-up costs and costs for replacement cards. There should be no monthly fee, and there should be no inactivity fee while the employee is still receiving wages on the card. All fees should be clearly outlined in your contract.
Q. Do companies have to buy new software to use payroll cards?
A. It depends on the payroll card program the company chooses. There are options available that integrate seamlessly with most existing payroll software systems. Commerce Bank makes it easy for businesses to seamlessly integrate a payroll card program. Learn more about the CommercePayments® DirectCheck card.
Q. How do employees check balances or monitor transactions on payroll cards?
A. Most low-cost payroll cards are Visa® or Mastercard® and many come with apps that enable employees to monitor their account balances and transactions and review account statements.
Q. Can employers see employees’ transactions on payroll cards?
A. No. Only employees can access information such as their transaction history, balances and purchases on their own payroll cards.
Q. Can employees dispute transactions on payroll cards?
A. Employees should notify the issuing financial institution if they suspect an error on their card. The institution will investigate it and correct it if an error was made.
The Commerce DirectCheck Card is a low-cost payroll solution that benefits employers and employees. Commerce Bank serves more than 350 clients and has been providing payroll card services for nearly 20 years. Commerce Bank makes it easy for businesses to seamlessly integrate a payroll program into its existing systems. Learn more about the Commerce DirectCheck card from Visa®.