Paycard An Option For Employers Seeking To Pay Those Without Bank Accounts

Paycard An Option For Employers Seeking To Pay Those Without Bank Accounts

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Many consumers are struggling with debt and foreclosure and are choosing to forego traditional economic practices, such as opening bank accounts or using credit cards for payments.

In turn, the former trend has caused problems for employers who are looking to save money by eliminating the printing costs associated with traditional payment methods.

Employers are increasingly turning to payroll debit cards as a cost-cutting alternative to issuing paper checks to workers without bank accounts, The Los Angeles Times reports. The cards, nicknamed paycards, provide another option for workers who can't accept direct deposits because they do not have a basic checking account or savings account.

While this may seem like an unlikely scenario, around 8 percent of U.S. households don't have any accounts with banks, The Los Angeles Times reports. Meaning for many Americans, paycards may prove a more convenient option than cashing checks and handling large volumes of bills.

In addition, many states require employers to issue checks to workers, making the complete transition away from paper more difficult for businesses looking to save money.

Employees who utilize paycards receive similar flexibility as debit card users, the news source says. The cards come with PIN numbers and can be used at bank ATMs, as well as at physical and online retailers.

In Irvine, California, Helpmates Staffing Services, which uses 600 to 1,000 temporary workers, initiated the program months ago. So far, it says the program has helped it lower costs by adding more employees to the paycard roster. Today, around 17 percent of the company's employees use the program, 63 percent use direct deposit, and 20 percent get paid by check.

"Moving paperless is going to save costs and make us more productive," Scott Leighton, Helpmates controller, told The Los Angeles Times. "For example, it cuts back on staffers having to make special trips to worksites with paychecks."

Paycard merchants say the new option represents a big advantage for those who don't use bank accounts, enabling them to avoid excessive fees from check-cashing sites.

The news source reports users can still be hit with a variety of fees. In California, there are no laws that particularly regulate paycards, leaving them vulnerable to withdrawal charges. The Division of Labor Standards Enforcement requires the cards to offer one free withdrawal during a pay period; however, the cards may still penalize those without traditional bank accounts.

About the Author:
Pete Miller is a financial journalist who focuses on relevant personal finance topics on e-wisdom.com, including bank accounts , credit cards insurance rates and mortgage loans.



Article Originally Published On: http://www.articlesnatch.com


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