Are You Paid With a Prepaid Debit Card? Here’s How To Avoid The Fees

atmIf you work or have worked for a retail store or fast food chain within the last few years, then chances are you’ve heard of the payroll debit card. The payroll debit card is a new way that many retailers and food chains are opting to pay their employees – and it comes at a cost.

The payroll debit card is being offered to workers in lieu of direct deposits or paychecks as an easy and safe option for receiving their pay. And often, they’re being told it’s their only option. While that may not sound like such a big deal, the costs of accessing funds through a payroll debit card are enough to push some employees below minimum wage. How would you like to pay a fee to receive your paycheck?

How the Payroll Debit Card Works

A payroll debit card is just what it sounds like – your employer deposits your paycheck onto the card and then gives the card to you instead of issuing a paycheck or giving the option of a direct deposit. The problem with that? You can’t pay your rent or mortgage with a debit card and you can’t view your balance using free internet banking like you would with a traditional bank account. That means you have to pay a fee to withdraw your money, pay a fee to view your balance, and even pay a fee if your card is inactive. These fees range anywhere from $1.75-$7.00. That can add up quickly.

Another problem? You can’t withdraw dollars and change from an ATM, so you wouldn’t be able to withdraw your full pay. Rather, you can only access the change by spending it with the card.

The payroll card isn’t all bad. It is FDIC insured and can be helpful to those who don’t have a bank account. Those without a bank account would have to pay a fee to cash their checks anyway and this card provides them FDIC protection they wouldn’t have had otherwise. But these fees are still a big problem. If you are in possession of a payroll debit card, here’s what you can do to avoid fees.

How to Avoid the Fees of a Payroll Debit Card

  1. Opt Out of the Payroll Debit Card
    One thing many employers aren’t telling their employees is that they have a right to say no to the payroll debit card. According to the Consumer Financial Protection Bureau, employers legally have to offer another option for receiving pay. That means if your employer tells you that the only way you can receive your pay is with the payroll card, you have a right to fight back and they legally have to give you another option – no matter what.

  2. Only Withdraw Funds from the Parent Bank of Your Payroll Debit Card
    If you decide you do want the payroll debit card, then the only real way to avoid a fee is to withdraw your funds from the bank that supports the card. However, this isn’t always a guarantee. To find out if this applies to you, view your card to see which bank is servicing it and call them to see if they will charge you a fee to withdraw the funds. If so, ask them if they’ll waive the fee if you open a bank account.

Remember, no matter what your employer might tell you, you absolutely have a right to say no to the payroll debit card. If you want to avoid the fees of the payroll debit card, tell your employer that you want to receive a paycheck or direct deposit instead. And if they still say that’s not an option, file a complaint with the Consumer Financial Protection Bureau.

Image Credit: redspotted

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  • Doree Taylor

    We also avoid the fees by going to a grocery store. If we find we suddenly need cash-in-hand for something when we don”t really need to shop for groceries, we just buy something small we can use (and probably will come to the store for soon enough, anyway) — a can of dog food, a single energy drink, a roll of cough drops, you get the picture. At the point or purchase, we select ‘cash back’ in the same amount we would have taken from the ATM. It can mean making two separate purchases, depending on how much you need and the ‘cash back on purchase’ polices of the store you’re at (and they do vary quite a bit) ; and now and then you may have to take $40 when all you wanted was $30 – but that happens when using an ATM, too. No matter what, it’s worth the minor hassle, cause it’s always a ‘win’ spending the money (that would have just been lost to fees) on something you leave the store with! We figure we have saved literally HUNDREDS in ATM fees over the years, by getting around that $3-$5 fee (again and again and again), in this way! PS… DON’T go out of your way to tell your grocery store’s corporate office! They’d probably love to ‘Snidely Whiplash’ people everywhere by adding a fee to get cash back at grocery stores.

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      That’s a great tip! It would definitely be better to use this option than to pay the ATM fees. Do you know if all grocery stories allow cash back (with no fees) as long as you make a purchase?

    • Shannon_ReadyForZero

      I second Ben! that is a really great tip – thanks for sharing this with us!