Should You Get Paid With Plastic?

by Center for Personal Finance editors

In an effort to cut costs, some companies now offer employees the option of receiving payroll cards. A payroll card is like a debit card, which workers can use to withdraw money from an ATM (automated teller machine) or to make purchases.

Many payroll cards bear either the Visa or the MasterCard logo, so you can use them almost anywhere. But fees often will apply at an ATM (unless you're a member of the financial institution that owns the machine).

So if your employer offers this service, should you consider it?

While it's convenient to have your wages immediately available, it also can be dangerous to your savings goals.

Many employers who offer payroll cards also offer direct deposit, which is a better option. That way, you automatically deposit your paycheck into your share draft/checking account and you never have the money in your pocket, an often irresistible temptation.

In addition, there are fees associated with payroll cards, typically between $2 and $5 per month. And there usually is a limit to the number of free ATM transactions you can have, such as one per week or one per pay period.

The primary targets of payroll cards are the approximately 25 million workers who do not have a credit union or bank account. The goal is to keep these people from going to check-cashing services, which typically charge a commission of 2.5% for each check cashed.

If you have co-workers who do not have a credit union account, encourage them to join yours, if eligible, or to look for a credit union they are eligible to join.

And if your employer asks whether you want a payroll card or direct deposit, choose direct deposit. It will help you save money.

December 29, 2003