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Payroll Debit Cards In The News

Payroll Debit Cards' Appeal Grows

By Karen Dybis / The Detroit News


It’s plastic, personalized and coming to a payroll office near you.

An increasing number of employers in Metro Detroit and nationwide are offering payroll debit cards to their work forces.

Instead of a paper check, employees receive what looks like an ATM card or gift card loaded with their weekly salary.

Meijer Inc., Domino’s Pizza and Comerica Inc. now offer the cards as a payroll option. Other companies using payroll debit cards range from U-Haul International Inc. to home-improvement retailer Lowe’s Cos. Inc. to movie emporium Blockbuster Inc.

Since Meijer began offering Paychek Plus in January, 20 percent of its employees have signed up, said spokesman John Zimmerman.

Industry analysts expect more businesses to jump on the debit-card bandwagon. Once aimed at employees without bank accounts, experts say companies are realizing a variety of workers can benefit from the flexible cards.

“We’re seeing a real surge in interest,” said Nora Arpin, first vice president of Comerica’s commercial card division. “The more people know about (payroll debit cards) the more they’re asking their employers about them.”

For example, some Meijer employees who use direct deposit to a regular bank account but want to control their spending habits have a small amount of their paycheck funded to a debit card, like an allowance.

Others give their cards to their kids to use at school or online, said Gary Tyler, a spokesman for FSV Payment Systems Ltd., which issues Meijer’s Paychek Plus cards.

Card programs vary, but here’s how they generally work: An employer signs up for the service through a third-party provider, like Comerica, or a card issuer like Comdata Corp. The employer sends payroll information to the provider, who links the salary information to the debit cards.

The cards are immediately ready to use. Most require the use of a personal identification number to access the account at ATMs or store registers. The card holder can also transfer the money to their other accounts via telephone, ATM or computer.

Advocates say this method saves on payroll personnel, equipment and supply costs at a time when most businesses are watching every penny.

According to the Federal Reserve, employers spend between $2.69 and $3 per employee to issue paper checks every pay cycle. Methods like direct deposit or debit cards cost only pennies.

Because the money is transferred electronically, the cards can be loaded with any compensation, including bonuses, expense reimbursements and other amounts employers typically disburse via checks.

A company in Nashville has its song royalties paid to debit cards, said Comdata spokesman Mike Brewer.

Temporary staffing companies have started to use payroll debit cards, mostly to serve their geographically diverse work force.

Some of the cards have a Visa or MasterCard logo as banks who issue payroll debit cards partner with the two credit giants. Having the credit card logo allows the cards to be used at places that don’t take debit cards, although in all cases the transaction is deducted from the balance on the debit card.

Although the cards have been around for more than five years, their popularity is still sporadic.

Only 1 percent of Domino’s 15,000 employees at its Ann Arbor headquarters use payroll debit cards since they became available last year, said spokeswoman Holly Ryan.

But 17 percent of U-Haul’s 17,500 employees receive their paychecks this way, said company spokeswoman Joanne Fried. U-Haul started its card program in 2001.

Industry analysts warn that the cards sometime come with hidden fees that can make them more expensive than simply depositing a paycheck in a bank account.

“It’s not an alternative for everyone,” said Ariana-Michele Moore, an analyst with Boston research firm Celent Communications who has studied the payroll debit card industry.

“You need to make sure the fees associated with these cards are in check,” Moore said. “You wouldn’t open a checking account without knowing what the fees are, and some (debit card) fees are easier to find than others.”

Much like an ATM card, Moore said there are monthly service fees on most accounts and other charges for replacing lost or stolen cards.

The charges can add up quickly as families check card balances or withdraw money. However, there typically are no charges for using the cards at stores. 

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