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Old 06-30-2013, 05:13 PM
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As Pay Cards Replace Paychecks, Bank Fees Hurt Workers

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A growing number of American workers are confronting a frustrating predicament on payday: to get their wages, they must first pay a fee.

For these largely hourly workers, paper paychecks and even direct deposit have been replaced by prepaid cards issued by their employers. Employees can use these cards, which work like debit cards, at an A.T.M. to withdraw their pay.

But in the overwhelming majority of cases, using the card involves a fee. And those fees can quickly add up: one provider, for example, charges $1.75 to make a withdrawal from most A.T.M.’s, $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.

These fees can take such a big bite out of paychecks that some employees end up making less than the minimum wage once the charges are taken into account, according to interviews with consumer lawyers, employees, and state and federal regulators.

Devonte Yates, 21, who earns $7.25 an hour working a drive-through station at a McDonald’s in Milwaukee, says he spends $40 to $50 a month on fees associated with his JPMorgan Chase payroll card.

“It’s pretty bad,” he said. “There’s a fee for literally everything you do.”

Many employees say they have no choice but to use the cards: some companies no longer offer common payroll options like ordinary checks or direct deposit.

At companies where there is a choice, it is often more in theory than in practice, according to interviews with employees, state regulators and consumer advocates. Employees say they are often automatically enrolled in the payroll card programs and confronted with a pile of paperwork if they want to opt out.

“We hear virtually every week from employees who never knew there were other options, and employers certainly don’t disabuse workers of that idea,” said Deyanira Del Rio, an associate director of the Neighborhood Economic Development Advocacy Project, which works with community groups in New York.

Taco Bell, Walgreen and Walmart are among the dozens of well-known companies that offer prepaid cards to their workers; the cards are particularly popular with retailers and restaurants. And they are quickly gaining momentum. In 2012, $34 billion was loaded onto 4.6 million active payroll cards, according to the research firm Aite Group. Aite said it expected that to reach $68.9 billion and 10.8 million cards by 2017.

Companies and card issuers, which include Bank of America, Wells Fargo and Citigroup, say the cards are cheaper and more efficient than checks — a calculator on Visa’s Web site estimates that a company with 500 workers could save $21,000 a year by switching from checks to payroll cards. On its Web site, Citigroup trumpets how the cards “guarantee pay on time to all employees.”

The largest issuer of payroll cards is NetSpend, based in Austin, Tex. Chuck Harris, the company’s president, says it attracts companies by offering convenience to employees and cost savings to employers.

“We built a product that an employer can fairly represent to their employees as having real benefits to them,” he said.

Sometimes, though, the incentives for employers to steer workers toward the cards are more explicit. In the case of the New York City Housing Authority, it stands to receive a dollar for every employee it signs up to Citibank’s payroll cards, according to a contract reviewed by The New York Times. (Sheila Stainback, a spokeswoman for the agency, noted that it had an annual budget of $3 billion and that roughly 430 employees had signed up for the card.)

Another McDonald’s worker, Natalie Gunshannon, 27, says the owners of the franchise that she worked for in Dallas, Pa., refused to deposit her pay directly into her checking account at a local credit union, which lets its customers use its A.T.M.’s free. Instead, Ms. Gunshannon said, she was forced to use a payroll card issued by JPMorgan Chase. She has since quit her job at the drive-through window and is suing the franchise owners.

“I know I deserve to get fairly paid for my work,” she said
Read the two pages article here: http://www.nytimes.com/2013/07/01/bu...t-workers.html

How much is enough?
 
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Old 07-01-2013, 04:01 AM
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Interesting article there, though what I can't get my head around is: What is the difference to a companies payroll department, from either giving out paycards to their staff and placing the money in a special type of account made by the company, or transferring it directly into the employees bank?

There is no monetary difference as there is no fee to be paid by the company either way. There is however 1 monetary difference and that is that if a company that employs a lot of staff, such a McDonalds does this, then they get to make the interest on the money for the extra few days that it is in their account.

Working for corporates in the past, I can see what they are up to and why, and sadly it is at the expense of the staff.

Personally, I would not accept such a method of payment if it meant that I had to pay a charge to take my money and would look into passing this to a union, if the company had one.
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Old 07-01-2013, 06:35 AM
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The payroll cards are NOT cheaper than cheques.
They've just transferred the costs from the employer to the employee.
It only looks cheaper to the employer but it isn't really.
If employers were forced to bear the complete costs of the cards long enough to get the funds to their employees, they'd quickly switch back to paying by cheque.
This is just another banker trick to take more money from society while providing nothing of value in return.
 
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Old 07-01-2013, 06:50 AM
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What fees are these people paying? If it is fees to use an non-bank version of an ATM then that is their choice. If there is a withdrawal fee for every transaction than that is clearly wrong.

If there is a minimum balance requirement than that is also a problem. A person should be able to withdraw their entire pay and put it in their pocket for no fee.
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Old 07-01-2013, 07:02 AM
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Originally Posted by G10 View Post
Personally, I would not accept such a method of payment if it meant that I had to pay a charge to take my money and would look into passing this to a union, if the company had one.
Whatever the mode of payment, the employees shouldn't pay any fees, period!

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This is just another banker trick to take more money from society while providing nothing of value in return.
That's exactly what it is. In the second page of the article, you can read this: "For banks that are looking to recoup billions of dollars in lost income from a spate of recent limits on debit and credit card fees, issuing payroll cards can be lucrative"

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A person should be able to withdraw their entire pay and put it in their pocket for no fee.
Exactly, each employee should be able to withdraw their entire pay.
 
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