What is a pay card?

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In a Nutshell

A pay card, or payroll card, is one way of getting your paycheck. Pay cards are a kind of reloadable debit card — employers can give them to their employees and deposit paychecks onto the cards instead of printing checks or using direct deposit. They’re good for employees who don’t have bank accounts or other reloadable debit cards. But pay cards don’t give you the range of services and ability to manage your money that bank accounts or other prepaid cards do.
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It’s payday, and your employer wants to pay you using a pay card. What does that mean? A pay card is one way to get your pay — but it may not be your best option.

If your employer offers to give you your wages on a card, it’s likely offering you a pay card, or a payroll card. If you accept, you’ll receive your paycheck as a direct deposit onto the card instead of getting a physical check or a direct deposit into your bank account at the end of each pay period. You can then use the card for purchases or to withdraw cash from an ATM, similar to a debit card.

Pay cards can be helpful if you don’t have a checking account to deposit paychecks into. Some employers may prefer using pay cards because it could save them time and money — with pay cards, they don’t have to print and distribute checks.

But pay cards aren’t always the best way to receive your pay because of potential fees and limitations in how you can manage them.

What you need to know before getting a pay card

Pay card fees

Pay cards typically don’t have monthly or maintenance fees, but they may charge you for other things that can add up. Here are some examples.

  • Activation fee
  • ATM cash withdrawal fee
  • Inactivity fee (if you haven’t used the card in a while)
  • Purchase fee
  • Customer service fee
  • Cash reload fee

Make sure to read the fine print to find out what fees your pay card would come with. The financial institution providing the card is required to give you disclosures about potential fees before you agree to sign up for a payroll card.

Once you’ve read the fee disclosures, think about the fees you’d probably be hit with. For example, if your pay card doesn’t waive ATM fees but you regularly need cash, those fees could pile up.

If you decide the payroll card isn’t for you, your employer must provide you with at least one alternative, like paper checks or direct deposit.

Managing a pay card

If you get a prepaid card, it’s a good idea to stay on top of the balance on your card and any fees you’re being charged. Check to see what reporting options your employer’s pay card offers before agreeing to a pay card — options can range from online monitoring to having to actively request written statements.

You also need to consider how you like to manage your money, and how long you plan to stay with your employer. If you tend to hop between jobs or you have multiple jobs, you could end up with a pile of different pay cards to manage. Or you may have to pay fees for moving money from one pay card to another — which could get expensive and time-consuming.

Can I overdraft on a pay card?

Some pay cards allow you to spend more money than you have in your account, which can result in overdraft fees. Check the card’s fine print to see if it allows you to opt in to overdraft protection, and, if so, what the fees would be.

What happens if my pay card is lost or stolen?

If your pay card is lost or stolen, you should notify the financial institution that issued the pay card immediately so that it can issue a replacement card. If you report the loss within two business days of learning of the loss or theft, your liability for fraudulent charges is up to $50, but you may be liable for more if you wait to report the lost card.

Paying fees to recover a lost card isn’t fun. But if you lose cash or an uncashed check, you’ll never see that money again. Pay cards have protections similar to other prepaid accounts. Learn more about checking accounts and prepaid debit cards below.

Will the pay card affect my credit?

No. Pay cards, like all prepaid cards, do not affect your credit scores.

Is a pay card right for me?

When you’re trying to decide if a pay card is a good option for you, first think about the potential fees. Are they something you’re willing to deal with? If so, consider how you like to manage your money and how often you expect to change jobs.

Pay cards may be challenging if you’re juggling multiple jobs or if you change jobs frequently. In either case, if you had a pay card with each employer, that could leave you with many disconnected pools of money to manage. You may prefer to keep your money in a single place.

On the other hand, if you can’t open a bank account, a pay card might be a great option for you.

Pay card alternatives

Employers have many options for payroll, including physical checks, direct deposits into a checking account and pay cards. If your boss is suggesting a pay card, note that it’s not your only option. Employers must offer you at least one alternative to receiving your paycheck on a pay card. Pay cards may seem like a simple solution, but they’re not ideal for everyone. If you decide to go with an alternative to pay cards, take a look at the options below for daily money management.

  • Checking accounts: Traditional bank accounts tend to offer better protections, like FDIC insurance, and generally come with a debit card. To get started, read our guide on how to open a bank account. Once you’re set up, you can ask your employer to deposit your paychecks directly into your bank account, or you could deposit paper checks yourself.
  • Prepaid debit cards: Prepaid debit cards are also reloadable debit cards, but they don’t require an employer to set them up — you’d own your debit card yourself. With a prepaid debit card, you can set up direct deposit, make purchases and withdraw cash from ATMs. They have fraud protections similar to what pay cards offer.

Next steps

If you don’t have a checking account or can’t open one, pay cards might be a good option. But as with any financial decision, do the math to see which payroll option is right for you — receiving your paycheck via traditional printed check, direct deposit into a checking account or direct deposit onto a pay card. When you’re considering your options, compare the fees and ease of use to see what’s best for you.

About the author: Sean McQuay is a long-time personal finance nerd. He’s passionate about budgets, credit cards, and earning useful rewards with minimal effort. He lives in the San Francisco Bay Area and is a father to three rambunctious kids. Read more.