Do your employees simply visit a bank machine and withdraw part or all of their pay using a paycard?
There are a variety of applications for prepaid cards, including gift cards, paycards or payroll cards, flexible spending account cards, government benefit cards (such as food stamps), insurance claim cards, employee reward cards, travel cards, remittance payment cards, and transportation cards. Since the mid-1990s, they have largely served as a replacement for paper-based payment instruments and related devices, such as gift certificates and check-based rebates.
Paycards look and work like a standard debit card, but there's a twist. Most of the employees using paycards don't have bank accounts (about 17% of U.S. workers fall into that category). The paycard draws on the payroll account of their employer.
The cards are as easy to manage electronically as direct deposit, eliminate the expense of printing and distributing paper payroll checks, and ensure that everyone gets paid on time and in full. Paper checks cost $1 to $2 each, while loading a paycard costs about 20 cents.
Paycards are a variant of stored-value gift cards. The employer sets up a central payroll account and issues a card to each employee, electronically depositing into the account the amount owed each payday. Employees can access their pay either by withdrawing cash at any ATM or by using the card to make purchases and get cash back. The company's payroll vendor tracks all the debits and credits for each paycard, sends out paper pay stubs and tax forms, and provides a way for employees to check their balances either online or by phone.
Last year, a survey by the American Payroll Association found that although only 3% of its 22,000 members were currently using paycards, a full 50% were considering adopting them.
Source: Fortune Small Business, Dec 2006/Jan 2007