New ruling: Payroll cards are FDIC-insured
December 2, 2008 by Kerry IsbergPosted in: In this week's e-newsletter, Latest News & Views, Money, Pay and benefits
Some employers have been reluctant to go to the payroll-card system — instead of direct deposit — because of worries about whether the funds would be government-insured. Worry no further.
All wages loaded onto payroll cards are covered under Federal Deposit Insurance Corp. (FDIC) insurance for up to $250,000 per account, according to a new legal opinion. Many employers have been hesitant to try the cards because of uncertainty whether these funds were insured against loss by the FDIC. This ruling, though, makes the cards a viable alternative to direct deposit for those with no bank accounts.
The severe problems on Wall Street recently prompted Congress to increase the FDIC insurance limit on individual bank accounts from $100,000 to $250,000.
For more info on setting up a payroll card program, check the American Payroll Association’s Paycard Portal at www.payrollannex.org/paycard/paycardportal.cfm
Tags: direct deposit, FDIC, Federal Deposit Insurance Corp., Payroll
December 8th, 2008 at 7:41 pm
Is anyone out there using the “payroll cards” – how do they work – and do you like them?
Thank you.
December 10th, 2008 at 10:47 am
We had an option to choose about 1 year ago, but we decided not to pursue. One of the consideration was the lost, fraud, being used by someone else, etc.
June 1st, 2009 at 2:06 pm
I think you should check with the payroll card company. I looked into it for our employees, and found the costs too high. For example, 1) employees can check their balances for free twice a month and after that the cost is $.50 per inquiry, 2) can get cash back with purchases at no cost, but to go in and just ask for cash $1.00 per incident, 3) $3.00 per month service fee, 4) $12.00 to close out account, 5) no online bill paying feature, 6) not all ATMs accept their card, 6) no monthly statement… It just wasn’t worth it.
I had our bank come in and open accounts for employees (even those with bad credit). Our employees were able to get checking, savings, debit cards, cash incentive, automatic payroll deposit, meet their bank rep, and th bank rep spoke with each employee (even advising some not to open an account due to garnishments, etc.). The bank brought some raffle prizes, and the company added a few more. We held several sessions to catch all three shifts. All sessions were held just before and after shift change. The employees loved it!
June 3rd, 2009 at 1:35 pm
We will begin using them this summer as a limited alternative to direct deposit. Our affiliated credit union has agreed to open an account for any of our employees (even “unbankables”). The charges we will have will be very limited.