As a growing number of American businesses, particularly retailers and restaurants, switch to paying workers’ wages with prepaid cards, workers find they must pay fees to access their pay.
For many lower-paid, mostly hourly workers, paper paychecks and even direct deposit have been replaced by prepaid cards issued by the employer. Employees can use these cards, which work like debit cards, at automatic teller machines (ATMs) to withdraw their pay, The New York Times reports. But most employees paid this way must pay fees to use the card, and the fees quickly add up. According to the Times, one provider charges $1.75 to make a withdrawal from most ATMs, $2.95 for a paper statement and $6 to replace a card. Some users even have to pay $7 inactivity fees for not using their cards.
When the fees are taken into account, some employees’ pay falls below minimum wage, attorneys and regulators say. One such employee, a 21-year-old man who earns $7.25 an hour at a McDonald’s drive-through window, says he spends $40 to $50 a month in fees for his JPMorgan Chase payroll card, though some transactions are free.
Because payroll cards were not hit by recent stricter regulations on credit and debit card fees, they represent a lucrative area for banks, the Times reports.
Many employees say they have no choice but to accept the cards because their employers no longer offer paper checks or direct deposit. Companies say they are switching to payroll cards because prepaid cards are less costly for them. Some card issuers offer employers incentives to switch employees to the cards. According to the New York Times, the New York City Housing Authority receives a dollar for every employee it signs up to Citibank’s payroll cards.
The Times reports that some employees have resorted to withdrawing their entire pay in cash to avoid paying a fee each time they make a transaction. One Pennsylvania McDonald’s employee quit her job over the card and is suing the franchise’s owners. “I know I deserve to get fairly paid for my work,” Natalie Gunshannon said.