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Paychecks Turning Into Debit Cards… With Fees

July 8, 2013
Plain English Version

More workers are getting their paychecks in the form of prepaid cards. Banks are doing whatever they can to convince employers that this is the cheapest way for them to pay their employees. Sometimes banks even pay employers for every worker who signs up for a card.

With prepaid cards comes a long list of fees workers may have to pay to use the cards, including:

  •  A.T.M. fees
  • Payments for paper statements
  • Payments to replace a card
  • Payments for inactivity
  • Payments for overdrafts
  • Payments for closing an account

The fee payments may result in some workers earning less than the minimum wage.

Big companies and big banks are the big winners. They promote the prepaid cards by saying the cards give employees choices in how to receive their wages. And often the cards are convenient to use, even if costly.

Taco Bell, Walgreens and Wal-Mart are among the dozens of well-known companies that offer prepaid cards to their workers.

In their defense of using cards, employers say that some workers do not have bank accounts and would have to go to check cashers and pay a fee. Furthermore, more Americans are not using banks.

Employees say the choices are not always made clear to them. One employee said he earns $7.25 an hour working at a drive-through station at a McDonald’s in Milwaukee. He says he spends $40 to $50 a month on fees associated with his JPMorgan Chase payroll card.

“It’s pretty bad,” he said. “There’s a fee for literally everything you do.”

Twenty-five states allow employers to use prepaid cards and not offer paper checks.

Source: The New York Times

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