What should an employer look for in a payroll card?

Payroll cards are a relatively new thing. 10 years ago, hardly anyone had heard of them. Now you’re thinking of getting a payroll card for your business. Either your boss or HR dept asked you to research them, an employee asked if you offered one or someone recommended them to you to get rid of paper check issues. Whatever the reason, there are a lot of different payroll cards out there. And not all are created equal. Roll up your sleeves and get ready to dive in, we’re gonna give you a crash course in what you should look for in a payroll card for your business.

First let’s go over what a payroll card is.

A payroll card is a card you give to your employees to enable them to receive direct deposit of their payroll without a bank account. Your employees can use their payroll cards to access their paycheck without paying check cashing fees and funds are loaded immediately and directly on payday.

Now let’s see why your business might want to use payroll cards.

Payroll cards help save your business money over issuing paper checks. The money savings comes from not printing or distributing the paper checks, no escheatment or reconciliation of checks and no labor spent handing out checks on payday.  Aside from money saving incentives, there are also employee benefit incentives. For employees who do not have a bank account, cashing a check can be time consuming and expensive. It’s nice to offer a solution that allows employees without bank accounts the convenience of instant access to their paycheck on payday.

So if all of the above makes sense to you and payroll cards seem like a good solution for your business and employees, lets now see what you need to look for in a payroll card.

First things is first, I would definitely recommend the employer or business provide the payroll card program rather than an employee buying a prepaid card and using that for direct deposit. There are several reasons for this. First, a good payroll card should cost an employer NOTHING to offer to their employees. There should not be any cost to the employer for any reason. Most major payroll card companies don’t offer cards directly to employees, the ones that are available usually cost a fee to purchase, a fee to load and maybe even a monthly fee. This doesn’t seem very convenient or cheap for your employees. You also do not have to go through your payroll processing bank. If you see one you like better elsewhere, you can use any payroll card with any bank. There are no reasons you shouldnt be able to directly offer the card you choose.

Second, the payroll card should be FDIC insured. This  means the card will usually bear a MasterCard or Visa logo on it. The cardholder is protected from funds on their card being lost or stolen. In most cases this is the same insurance you get through your banks debit cards or a major credit card. For most everyone, every penny counts. If your employee cashes their check and loses their cash, there’s no insurance for them. It would be a great benefit for them if you could offer them a card that helps protect their money.

Third, fees. There will be fees associated with all payroll card programs. Much like credit cards and debit cards, payroll card companies have to pay the networks to use their ATMs or POS networks. While credit card and debit card companies can recoup the costs through interest or bank fees, payroll card companies cant. I am not saying since there’s no avoiding fees you should just accept them and move on. Look at the fees the payroll card company charges your employees. Are they fair and reasonable? Are there fees like a load fee for every time your employee gets paid? Or monthly fees just for having the card? ALL payroll cards should allow your employee 100% free access to their money at least once each pay period. That means if your employee likes having cash and wants withdrawal all of their money off the payroll card each payday, there will be no fee. I think monthly fees, load fees and activation fees are fees that should definitely be avoided. They are unnecessary and unfair to your employees.

Last but not least, bells and whistles. The bells and whistles are not for you, but for your employees. Offering your employees a payroll card with features like savings accounts, cash back and bill pay helps your employees feel like they’re getting more than just a piece of plastic with their money loaded on it. A good payroll card company should offer features that help cardholders. Features like building good financial habits with a built in savings account, or through convenience like being able to pay bills online. These extra bells and whistles are going to narrow down your selections a lot when filtering through companies.

So let’s review them again. The top things to look for in a payroll card:

1. Should cost the employer or business nothing to offer
2. FDIC Insured to protect employees funds
3. Reasonable fees for cardholders
4. Extra features aimed at helping their cardholders

Now that you know what a payroll card is, why you need one and what to look for you are ready to filter through all of the great providers out there and choose the best one for your employees. Remember, this is about helping your business save money and time as well as offering a great benefit to your employees.

How do I avoid getting into the payday loan trap?

A payday loan is a short term loan provided either through a local loan store or through an internet based provider. These loans are normally 14 days in length and carry a fixed fee of 20-25% of the loan value. Some payday loans are renewable, which by just paying the fee, you can extend your payoff another 14 days. If you extend rather than paying in full, you have just fell into the payday loan trap. The payday loan trap is an endless cycle of borrowing and paying off the same loan and paying huge amounts of interest to be able to do so. Most customers continue paying just the fee until they are required to pay off the principal in full. By that point they have more than likely not been able to catch up and will have to take out another payday loan.

We all have unforeseen things happen to us and think ‘well if I can just borrow a little money to get by this week, everything will be ok’. We are just digging our self a little hole. If we don’t pay off the loan in full when it is due or pay down against the principal, we have just dug that hole a little bigger and it becomes an endless cycle of robbing Peter to pay Paul.

To avoid getting caught up in the payday loan trap, there are several steps you can take:

• Never take out a loan for non-essentials such as vacation, entertainment, etc.
• Only use payday loans for emergency situations
• Try not to borrow more than 50% of your next paycheck
• Never borrow more than you need or can afford to pay back in 2 weeks
• Shop around for the best rate of a payday loan
• Never pay just the interest and extend the loan, be sure you can pay it in full
• Set up a budget. Write out all your expenses and their due dates vs. your income

Setting up a budget is extremely helpful in understanding just exactly how much discretionary income you have. On our website, www.readyfunds.net under our eZlearn/Money management page, we have downloadable templates that you can use to set your long term goals, and templates to keep track and manage your money. We also have a savings account to set aside money each payroll for those emergencies that come up unexpectedly. If you set it aside a little each week, you will never miss it.

At ReadyFUND$ we understand that sometimes you do have an emergency and   need a little extra money. ReadyFUND$ cardholders do have a short term loan option called eZaccess offered by a third party company with a low loan rate. eZaccess has features that help prevent you from falling into the Payday loan trap.  For more information, fees, terms and conditions, log into your ReadyFUND$ account at www.readyfunds.net.

“If you see yourself as prosperous, you will be. If you see yourself as continually hard up, that is exactly what you will be.”
Robert Collier