What Is a Pay Card?

What is a pay card?

A pay card – also called a payroll card or an employee debit card – is a payment method employers can issue to team members. It works much like a debit card and serves as an alternative to direct deposit, paper paychecks and other payment forms. 

For some employers, pay cards can be a less complicated way to issue payment. They can also be more convenient for some employees, such as those without bank accounts. 

Pay cards first appeared in the late 1990s. Since then, their use has grown. According to Bob Castaneda, program director at Walden University, this paperless payroll option can be used at nearly all businesses that accept major credit cards. 

“The payroll card generally uses a national credit card issuer like Visa or MasterCard, enabling the card to be used for cash withdrawals at ATMs, automatic bill payments and at businesses where credit cards are accepted,” Castaneda explained. 

Pay card providers

If your business wants to issue pay cards, you’ll need a trustworthy payroll card provider. While your current payroll service may support pay cards, you can also opt for a dedicated payroll card service. You’ll want to vet any potential provider to ensure it charges minimal fees, offers account history access and can protect your team in case of unauthorized transactions or transfers.

Here are eight companies you can work with to issue pay cards:

• ADP Aline
• Truist Financial
• Comdata
• Global Cash Card
• Money Network
• rapid! PayCard
• Netspend Skylight ONE 
• U.S. Bank Focus

Benefits of payroll cards for employers

Compensating employees using pay cards can bring several advantages to your business:  

• Pay cards make payroll easy and convenient. Pay cards offer employers a fast and secure way to pay their employees, especially those without a bank account. Steve Shouler of PayNortheast explained that employers can easily deposit wages onto an employee’s pay card using its associated routing and account numbers. 
• Pay cards reduce the risk of fraud. Pay cards don’t bring the fraud risks paper checks are subject to.  
• Pay cards can save money and time. Printing and issuing paper checks takes time, and each check can cost businesses between $4 and $20. Plus, reloading payroll cards is easy – and you won’t have to deal with the hassles of employees losing paychecks.

Benefits of payroll cards for employees

Employees can benefit from receiving their wages through pay cards in a few ways:

• Pay cards let employees access wages without a bank account. Not everyone has or wants a bank account, and not everyone is eligible to open one. In fact, 6 percent of adults were unbanked – without an active checking or savings account – in 2022. Pay cards are an attractive option for employees without bank accounts, as they can use them to pay their bills and avoid check-cashing fees.
• Some employees prefer pay cards. Some individuals with bank accounts prefer to be paid via pay cards. Although prepaid cards are less common among households with bank accounts, 5.7 percent of those households still used prepaid cards in 2021. Sometimes, employees will divide their wages between bank accounts and employee debit cards to help manage their finances and build their savings. 
• It’s easy to review pay card accounts. Most pay card providers provide a portal where users can view their direct deposits, retrieve account data and set up balance alerts to better manage their spending and achieve their financial goals. “You can access balance information, view transactions and dispute charges, just like you would with a credit or debit card,” Shouler explained. 

What fees are involved in using a pay card?

It’s imperative that employers and employees have a firm grasp of the fees involved with using pay cards. Fees vary by card but may include the following: 

• Usage fees: Some card issuers charge a fee for every purchase made using the card.
• ATM fees: A card issuer may charge a fee when an employee uses an ATM outside the bank’s network. It may even charge a fee when the cardholder checks their balance at an ATM. 
• Other fees: Card issuers may also charge an activation fee, inactivity fee, monthly maintenance fee, reloading fee, customer service fee, and a fee to replace a lost or stolen card. 

“The estimated annual cost to an employee for a payroll card can be as high as $72 a year just for maintenance fees,” Castaneda cautioned. “This excludes ATM withdrawal fees, which can cost up to $5 per transaction.” 

It’s not just employees who pay fees. Employers may pay to place the company’s logo on pay cards or issue temporary cards. 

CFPC guidance on fees

The Consumer Financial Protection Bureau (CFPB) issued the following guidance to ensure employees are aware of and understand all pay card-related fees: 

• Employers should provide the card’s terms and conditions. Employees should give all employees a copy of the pay card’s terms and conditions, including any associated fees. The CFPB recommends that individuals read the conditions to understand all fees. 
• Employers should train employees on using pay cards. Employers should also provide training on how to use the pay card so that there are no misunderstandings. 
• Card providers must issue disclosures to employees. Additionally, the CFPB has enacted a rule requiring card providers to make certain disclosures to employees who choose to be paid via a payroll card. The process involves providing a “short” form that discloses the specific fees, while a “long” form discloses all fees and other details about the employee’s pay card.

Review the laws and regulations in your state before choosing to offer employee payroll cards. Understand any fees you – and your employees – might have to pay, and disclose these fees to your employees.

Best payroll services with pay cards

Many of our choices for the best payroll services offer pay card options for your convenience. Here are a few that stand out:

• Intuit QuickBooks Payroll: In addition to fast and easy same-day direct deposit, this service offers pay card options and other direct deposit alternatives. Learn more in our detailed Intuit QuickBooks Payroll review.
• ADP: ADP includes options to issue payment via direct deposit, paper check or a preloaded debit card. Our ADP payroll software review highlights this service’s user-friendly portal, where employees can see all payroll information.
• OnPay: OnPay is great for small businesses needing paper-based or paperless payroll options. You can print checks yourself after running payroll, deposit earnings directly or issue payroll cards. Learn about this platform’s features in our OnPay payroll software review.
• Paycor: Whether employees prefer a pay card or direct deposit, they can view all their account information through Paycor’s smartphone app. Read about this service’s offerings in our Paycor review. 

Pay cards may be the best choice for your business

Pay cards can be a convenient option for employees and employers, but they can also come with unwanted fees and may not be right for your business. Speak with your employees to understand their payment preferences, and research providers to choose a payroll service that can accommodate everyone’s needs. 

Sammi Caramela and Heather Larson contributed to this article. Source interviews were conducted for a previous version of this article.