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"For the estimated 68 million Americans who don't have access to a checking account or are just partially banked, payroll cards serve as an inclusion tool to help them to manage their money without the additional costs, stigma or the risk of living a cash-based lifestyle," said
Payroll cards are branded with the logo of a major card brand such as Discover®, MasterCard®, or Visa®. Each pay period wages are deposited onto the payroll card account and are then immediately available to the employee at ATMs or to make purchases at stores or online. A financial institution issues the funds on behalf of an employer and each payroll cardholder's funds are insured by the bank or credit union into which funds are deposited.
"As the prepaid card industry's leading trade association, NBPCA developed Payroll Cards Leading Practices for our members to ensure payroll cards meet regulatory requirements. Collaborating with Consumer Action, NBPCA developed an Employer and Employee Guide to Payroll Cards to help employers understand state and federal laws they must follow when offering payroll cards, as well as to educate employees on using their payroll cards wisely," added Bower.
Consumers choose payroll cards because they are safe and ensure prompt delivery of wages even when the employee is on vacation, sick or events occur like office closures or severe weather. Payroll cards also save employees money. A 2010 study by the
Using payroll cards help employers save money and reduce the fraud associated with printing, distributing and mailing checks. According to
In an increasingly card-based economy, where many businesses no longer accept checks, payroll cards work like debit cards linked to checking accounts, allowing consumers to pay bills, make purchases at merchants or online, access ATMs and more. A 2012 research report from the Federal Reserve Bank of
Payroll cards are also highly regulated under both federal and state law. Federal Regulation E mandates financial institutions issuing payroll cards must provide employees with initial disclosures of the card's terms and conditions, including but not limited to consumer liability, fees and error resolution procedures. Regulation E also prohibits employers from requiring employees to receive their wages on a payroll card and requires employers offer at least one other payment option. State law determines whether paper paychecks are required and many states currently require employees to be able to access their full pay at least once per pay period without charge.
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