‘Mythbusting’ Payroll Cards
By Thea Garon, Center for Financial Services Innovation
Payroll cards are valuable financial tools that employees, particularly those in low-paying or hourly jobs, can use to manage their hard-earned money. But despite the many benefits of payroll cards, the product has gained a negative reputation in recent years. High-profile lawsuits, negative press, and a wave of state regulatory actions have contributed to a lack of dialogue and understanding among industry stakeholders, policymakers, regulators, and consumer advocates.
CFIS has drawn upon its Compass Guide to Payroll Cards for our first-ever “Payroll Industry Scorecard.” In it, we assessed the level of quality of the payroll card industry by collecting information about eight of the largest program managers in the industry, including ADP, Comdata, First Data, Global Cash Card, Netspend, Transcard, UniRush LLC and U.S. Bank. These program managers collectively represent approximately 75 percent of the payroll card industry.
For the payroll card industry as a whole, core features (standards for a high quality payroll account) earned an A- grade. Stretch features (best practices for providers to stretch beyond the basics) earned a B+ grade. Next Gen features (additional services that improve consumers’ lives) earned a C- grade.
What we found was encouraging: The payroll cards in our sample offer many of the basic features and functionality to be considered high-quality products. But opportunities remain for program managers to stretch beyond the basics by offering additional features that can help cardholders build long-term and lasting financial health.
To advance the dialogue around payroll cards, CFSI is eager to “mythbust” a few misconceptions about payroll cards:
MYTH: Employees routinely incur fees when accessing their wages on a payroll card.
BUSTED: Despite a few high-profile missteps by individual employers, the payroll cards in our sample allow employees to access their full net wages without incurring any fees. As required by certain state wage and hour laws, all of the programs in our sample offer employees at least one free withdrawal of their full net wages each pay period at any bank or credit union in the Visa or Mastercard network. And all of the programs we looked at go beyond the legal requirements by providing employees unlimited free withdrawals at select merchants that offer cash back with purchases. None of the programs charge fees, such as monthly maintenance fees, that deny employees a chance to access their full net wages.
REALITY: Payroll card programs should more effectively communicate fees to cardholders.
We found significant room for improvement when it comes to helping cardholders avoid fees and gain the most value from their cards. While all of the programs in our sample provide fee schedules to employers to pass along to employees, some are lengthy, confusing and challenging to understand at a glance. There is also significant variation in fee schedules across programs, which can make it challenging for employers to assess the apples-to-apples costs of different programs. Few program managers offer additional tools, such as online videos and tutorials, which can help cardholders avoid fees and gain the most value from their cards.
MYTH: Customer service is expensive and inaccessible.
BUSTED: All of the programs we looked at offer free interactive voice response (IVR) service in both English and Spanish, allowing employees to access important information about their accounts. All of the programs in our sample also offer access to a live customer service agent during business hours, and nearly all of the programs allow employees to speak with a live agent for free. More than half of the programs in our sample provide access to live customer service assistance beyond regular business hours.
REALITY: Program managers have an opportunity to offer additional features that can help employees build financial health.
Few of the programs in our sample offer budgeting or personal financial management tools that employees can use to plan, budget and track their expenses. Only a handful of the programs in our sample allow employees to link their payroll cards to a separate savings platform. These types of features would help employees manage their spending and set aside money for a rainy day, enabling them to be resilient in the face of unexpected events.
With this latest Industry Scorecard, CFSI urges stakeholders, employers, consumer advocates, policymakers and regulators to consider these findings as the basis for a constructive dialogue about the quality and future of payroll cards. By adopting some of the features described above, program managers can design programs that help cardholders build financial health. Employers can use this report—as well as CFSI’s Compass Guide to Payroll Cards—to make informed decisions about which programs provide the highest quality and most affordable payroll solutions.
And isn’t that the kind of payday we’d all like to receive?
Thea Garon analyzes emerging trends in the financial services industry for CFSI, and is an expert on consumer experience and industry trends in the prepaid and payroll card industries. At present, she also leads CFSI’s Financial Health Measurement Project, an initiative designed to help financial service providers measure and improve their customers’ financial health. Thea’s expertise and passion for her work derives from a longstanding commitment to working with underserved communities.
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