Regular readers of this blog know that I have warned consumers in several blog posts about the dangers of prepaid cards. Sadly, one of my concerns is becoming all too real for employees.
Philly.com reported that a Pennsylvania woman has filed a class-action lawsuit against her former employer for forcing her to receive her pay on a prepaid card:
"Gunshannon, 27, of Dallas Township, worked at McDonald's Restaurant on the Dallas Highway from April 24 to May 15. When she received her first paycheck, enclosed was a Chase Bank debit card with instructions on how to use it and the fees attached... Gunshannon never signed the card and when she returned to work she asked her supervisor if she could be paid by check or by direct deposit. She was told the card was the only option."
The complaint alleges that this and other employers' prepaid-card-only payroll method violates state law. At the Pennsylvania Department of Labor and Industry, you can download the full text of the Wage Payment And Collection Law. According to the lawyer representing Gunshannon and the other plaintiffs:
"... many more people are coming forward and telling the same stories. Pennsylvania law states employees are entitled to have a choice to be paid by check or cash, he said."
It's infuriating to read a story like this, because this problem is entirely avoidable. When employers force employees to prepaid payroll cards, it is a loss of both money and freedom for employees. First, the monetary losses are immediate and direct. The employees immediately incur fees associated with the payroll prepaid card, regardless of whether the employees use the card or withdraws all money from the card to deposit it into a traditional checking/savings bank account.
Second, the employer has lost the freedom of choice. The employee cannot cancel the prepaid payroll card. And, the employer is deciding and choosing the banking choice, not the employee. With a traditional paper check, the employee had the choice of which bank to do business with. Not so with a payroll prepaid card, because the cards are tied to ATM networks with higher fees at banks that are not part of the network.
Third, you know your banking needs best, not your employer. Sadly, in this instance the employer is deciding regardless of the employees' needs. A responsible employer would provide a choice of payment methods; especially direct deposit for employees that already have traditional checking. They have these traditional bank accounts for a reason, often configured to avoid large monthly banking fees.
Employers should not force employees to use costly prepaid cards. I use the term "costly" because for employees making minimum wage, fees of $1.00 to $5.00 are enormous:
"According to the complaint filed, the JP Morgan Chase payroll card lists several fees, including a $1.50 charge for ATM withdrawals, $5 for over-the-counter cash withdrawals, $1 per balance inquiry, 75 cents per online bill payment and $15 for lost/stolen card."
Now, I am sure that the employer means well. What is undeniable is that in an instance like this, the employer has shifted some of their payroll costs to the employees. Consider: with traditional paper checks, the employer paid fees to a printer to print the checks, administrative costs to distribute those paper checks, and fees to the bank the checks were drawn on. Prepaid payroll cards enable employers to eliminate paper printing costs and check distribution costs; and probably lower their banking fees because the employees now incur prepaid payroll card fees they didn't incur previously. Of course, the online bank administering the prepaid payroll card loves the new revenue stream by charging fees to the larger number of employees.
While it's great that Gunshannon is standing up for herself and similar employees, it shouldn't be this way. It doesn't have to be this way. To learn more, read the articles below:
- How To Evaluate Prepaid Card Options
- Is It Wise To Move Your Money To a Prepaid Card?
- 5 Things You Should Know About Prepaid Cards
- Consumer Reports Reviews Several Prepaid Cards
- Your Rights And The Differences Between The Three Types of Plastic In Your Wallet or Purse
- Bank of American Merchant Services and Money Network Announce New Payroll Solution
- Move Your Money To... Walmart? A Good Deal?