According to an article in the San Francisco Gate (the online edition of the San Francisco Chronicle), by 2014, an estimate 5.4 million American workers will be receiving prepaid payroll cards. That’s more than double the number of people had been receiving those cards in 2011.
What are prepaid payroll cards?
These are essentially the net proceeds of an employee’s gross salary for a given pay-period delivered to them in the form of a prepaid debit card. Employers have been starting to provide these prepaid payroll cards (prepaid debit cards) to their employees who do not have bank accounts of their own. Most people who have a bank account would normally take their paycheck to their bank (or more typically today, have their payday sent to their bank account via direct deposit) and deposit their paycheck, and then withdraw only the portion that they need in cash. The remainder would stay in the checking account to be used as needed.
Check Cashing Center / Payday Loan Alternative
How would people who (for whatever reason) do not have a bank obtain cash from their paychecks? Normally, people in those situations would go to check cashing centers and have those stores cash their checks for them. Those people would use those check cashing centers as bank equivalents. Not only would these people go to the check cashing centers to have their checks cashed, but if they needed a little extra money, they might go there for payday loans. Payday loans are unsecured personal installment loans. The advent of these prepaid payroll cards might start to eliminate the need for these check cashing centers. Since these payroll debit cards are essentially cash already, people who receive them can just use them like cash, because essentially, that’s what they are. So people with prepaid payroll cards can just go to the shops that they typically go to and purchase goods and services and instead of paying with cash, they can just pay for their goods with their prepaid debit card.
Advantages and Disadvantages of Prepaid Payroll Cards
Obviously the biggest advantages of prepaid payroll cards is that the user no longer will need to make a special trip to their check cashing center (and pay a fee) to obtain their cash; they will have their entire net paycheck on a debit card (essentially just like any other prepaid debit card.) The ability to not have a large amount of cash in one’s wallet makes it easier to carry around with you as you will just have one card instead of all of the cash.
There are several disadvantages to carrying prepaid cards instead of cash. One of which is that if you were to lose the card, you have lost all of your money. It is unlike inadvertently giving someone an extra twenty dollar bill because the two bills were stuck together. If you lose the prepaid payroll card, you will have lost your entire paycheck for that week. Obviously that might result in that unfortunate person needing to seek out the services of one of the online payday loans companies.
Another disadvantage of prepaid payroll cards is that they are essentially cash. Yes, we mentioned that having these cards loaded with cash was an advantage, it could also be a disadvantage. Prepaid payroll cards function in a similar manner to a prepaid MasterCard or reloadable prepaid debit cards. More and more people are becoming familiar with these cards. One company that has been advertising on television is Greendot. With Greendot prepaid credit cards (or any other prepaid MasterCard), you pre-load the cards with a fixed amount of money and them use the card like and other ATM (debt card) – you spend the money on the card for good and services. The problem is that it is very easy to spend the money. It is simple to take prepaid payroll cards (or a prepaid MasterCard for that manner) and spend all of the money, almost without even realizing it. At least with cash, you physically observe the number of currency notes being depleted from your wallet. With prepaid payroll cards, it is almost invisible to you. You could very easily spend all of your money without even realizing it and then have to seek out online payday loans again.
The payroll card program that employers are using that provide prepaid payroll cards is becoming an integral payroll tool for both employers and employees, alike. The payroll debit cards are very easy to use. They help people to avoid the need and expense of check cashing retailers. In the future, there may not be a need for those check cashing centers. However, since many people still need a little extra cash now and then, online payday loans will likely continue to be needed.
