What is a payroll card?

Payroll cards (or paycards) are prepaid debit cards your employer may arrange to pay your wages or salary. With this method of payment, your pay is loaded onto the payroll card rather than directly deposited into your bank account. Once your pay is loaded onto the card, you should be able to use it wherever you can use a debit card.

There are many payroll cards in use today. In the restaurant industry, for example, it is common for employers to pay staff with Wisely or PaychekPLUS branded cards. Other industries use Dash Card, iPay, or the Rapid! Paycard. No matter the brand name, they all work in a similar way.

What does Texas law say about getting paid with a payroll card?

Texas law allows your employer to pay your wages by depositing the money onto a prepaid debit card. But the company has to follow some very strict rules first. Under federal and state law, your employer must:

• Give you written notice on your first day of work;

• Describe in writing all the fees you could be charged if you accept your wages on payroll card;

• Offer you the choice to opt-out of the payroll card and allow you to choose which payment method works best for you;

• Ensure that the payroll card links to an insured bank so you will not lose your money if it goes belly up; and

• Electronically deposit your wages on to the card (unless you opt-out).

Getting paid by a payroll card doesn’t mean your employer can ignore other wage and hour laws. The company still has to give you a written pay stub, withhold taxes from your pay, and pay you in full and on time each pay period.

Can my employer force me to accept my pay on a paycard?

No. Your employer cannot force you to accept your wages on a payroll card. By law, your employer has to offer you at least one other option: a paper check or direct deposit. So, if you want to opt-out of receiving your paycheck by payroll card you can. To opt-out, ask your employer about other ways to receive your wages. Also, be sure not to sign any forms agreeing to receive wage payments on a paycard. Typical forms look like this:

Should I opt-out of getting paid with a paycard?

It depends. If you have a checking or savings account with a bank or credit union, then it’s not worth it to get paid with a payroll card. Directly depositing your paycheck into your account will be much easier and cheaper. If you don’t have a bank account, then it might be a more convenient option than cashing a paper check each payday. It may also be safer than carrying cash.

But that convenience and safety can cost you. Payroll card companies make money, in part, by charging fees. They need those fees to survive. So they charge you for (almost) everything that might be free (or cheaper) at a bank, including:

• Activating the card to be able to use it
• Withdrawing money at an ATM that’s not in their network
• Paper statements
• Checking how much money you have available on your paycard
• Reloading money to your card
• Replacing a lost or stolen payroll card
• Using your card to make purchases or to pay a bill
• Not using your card enough (i.e., inactivity fees)
• Transferring your money off the paycard
• Closing your payroll card “account”

Some of these fees can be more than you make per hour. Take the “Rapid! PayCard® Visa® Payroll Card” for example. If you misplace that card, you’ll have to pay $10 to $50 for a replacement, depending on how soon you want it delivered. Minimum wage in Texas has been stuck at $7.25 per hour since 2009. So, if that’s what you’re paid, it would take you about 2-6 hours of work to earn enough to pay for a replacement.

Other fees may seem small at first, but over time they can gobble up your paycheck too. That same card, the Rapid! PayCard® Visa® Payroll Card, charges 75 cents every time you want to check your balance.

What’s the real reason my employer is pushing payroll cards now?

Paycards are popular with employers for many reasons. A big one: they cut costs. It costs companies money to issue checks and replace lost or stolen ones. The Association for Financial Professionals (AFP) puts the cost at $2.01 to $4.00 per check, which adds up fast. With payroll cards they avoid many of those fees and shift the costs onto you. In the past, if you lost a paper check your employer would have to cut you a new one and eat that replacement cost. If you lose your paycard, you pay the replacement fee. Not your employer.

Can I ever sue my employer for paying me with a payroll card?

In some situations, yes. If you end up pocketing less than minimum wage because of the fees charged for using (or not using) the paycard, then you may sue your employer for wage theft. That’s exactly what a group of Dave & Buster’s employees did. They sued the company claiming that it was impossible to withdraw their pay from their paycards without forking over fees to do so. Those mandatory fees, they alleged, dropped their pay below minimum wage. Dave & Buster’s quickly settled that lawsuit.

They weren’t alone. Fast-food chain Hardee’s (which also goes by Carl’s Jr.) was fined by the U.S. Department of Labor after its employees reported the chain for its use of payroll cards. While Hardee’s may have paid the fine, it didn’t abandon the paycards.

If anything, more employers are adopting them and more workers are accepting them without realizing they have a choice. If your employer never gave you the option to opt out, and payroll card fees have eaten into your pay, you may have a wage theft claim. Contact Davis Employment Law for a complimentary case evaluation.