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The Pros and Cons of a Payroll Card

Updated May 17, 2023

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Payroll cards are a growing trend among small businesses. Research by the Mercator Advisory Group shows that the money loaded onto payroll cards is projected to reach nearly $51 billion by the end of 2021, up from $40.3 billion in 2017.

Payroll cards provide easy access to paychecks without the need for a bank account or banking relationship. The option of payroll cards is a critical necessity for many Americans who cannot – or choose not to – open a bank account.

What is a payroll card?

Payroll cards allow employees to access their paychecks without setting up a bank account. Instead, they function like debit cards: Payroll cards are loaded with a paycheck each pay period and can be used to withdraw cash or make purchases. As a result, payroll cards can be an advantageous tool for small businesses with employees who don’t have bank accounts or have limited banking options in their location.

Depending on which payroll card service in which you enroll, it may be more cost-effective to provide a payroll card option to your workers. Printing and handing out checks can be expensive, and certain payroll companies may charge extra for direct deposit.

From a worker’s perspective, it’s essential to understand the different fees associated with payroll cards, as they aren’t exactly like traditional debit cards. While it can be an excellent option for employees with no bank account, you’ll have to pay some fees – like charges for ATM withdrawals, balance inquiries, fund transfers, monthly maintenance and account closures. The exact costs will depend on which company you’re working with.

Editor’s note: Looking for the right payroll service for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

Payroll card pros and cons

Payroll card pros

Here are some benefits of using payroll cards:

  • They’re a simple, easy way for employees to access their paychecks without opening a bank account.
  • Lost or stolen payroll cards are easy to replace (for a fee).
  • Workers can access their funds immediately and conveniently.

Payroll card cons

These are some disadvantages of using payroll cards:

  • Bank accounts provide interest, whereas payroll cards do not.
  • Direct deposits cannot be lost or stolen like a payroll card can.
  • Additional fees apply – such as when an employee views their balance.

Payroll card providers

You have several payroll card providers to choose from for your small business. Some of the best payroll services offer payroll cards as a way to compensate employees. If you’re working with a major payroll provider, talk with your representative to determine the best options for your business.

According to the American Payroll Association, these are some options to consider.

  • Money Network: This company offers payroll cards and an intuitive online experience to manage your payroll card offering. It provides enhanced security, flexible deposit options and limited liability. Additionally, Money Network backs all its funds with the Federal Deposit Insurance Corporation. The zero-liability protection means your employees are covered if something happens to their payroll card. The company has more than 20 years of experience as a prepaid debit processing company, so you’ll be partnering with an established industry provider.
  • Netspend Skylight ONE Card: Netspend is one of the largest payment programs in the country and offers flexible enrollment and electronic reporting. It provides an online portal where your workers can view their online deposits and statements. As a full-service partner, Netspend provides support for setup, marketing, training and compliance.
  • Rapid PayCard: This payroll card from Mastercard offers a 100% e-payroll solution for its clients. There are several distribution options, including e-wallet payouts, digital checks and various payroll cards. It offers instant payment and electronic payroll delivery at zero cost. It also provides electronic pay stubs and other convenient features for you and your workers.
  • U.S. Bank: U.S. Bank provides payroll cards to small businesses, making it one of the few major banking institutions that backs payroll card initiatives. Its payroll card initiative is calle Focus, and it includes fraud protection, online purchasing and 100% electronic payments. It also provides text and email alerts, cash-back rewards programs, savings account features, and a mobile app.
  • Wisely Pay by ADP: Wisely is a payroll card provider backed by ADP, one of the largest payroll processing and HR management companies in the United States. It offers fee-free cash access at ATMs and banks, and free cash back at retailers. Wisely also has a mobile app where users can manage funds. It also offers multiple sources for funding, so you can connect other paychecks or tax refunds to your Wisely account. It’s compliant in all 50 states, and there is high-level support for small companies.

How to transfer money from a payroll card to a bank account

Transferring money from your payroll card to a bank account can be complicated or straightforward, depending on which payroll card provider you choose. Surprisingly, there isn’t much information out there on how to transfer funds from a payroll card to a bank account. Some services build it into their offerings, while you may have to speak with your bank or payroll card provider for transfers.

Payroll card alternatives

If your business offers your employees a payroll card, you must also provide an option for direct deposit or paper checks to be compliant with labor laws. 

These are some other payroll card alternatives to consider. Some require the employee to have a bank account, while more traditional methods accommodate the unbanked.

Direct deposit

Direct deposit allows your employees to receive their paychecks electronically. During the onboarding process, employees will provide HR with their checking or savings account information. On payday, you’ll use this information to transfer employees’ pay directly into their bank accounts.

Although employees need a bank account to take advantage of direct deposit, it’s a win-win: It eliminates the need for paper checks on your end, and your workers can cut down on trips to the bank.

Did You Know?Did you know

Direct deposit is the most common form of payment from an employer to employee in the U.S. Nearly 94% of employees use direct deposit to receive their paychecks.

ACH transfer

In the 1970s, the Automated Clearing House (ACH) improved how money was electronically transferred between banks. It not only solved the onslaught of paper checks, but featured bank-level encryption to reduce fraud. 

ACH provides a direct link between two bank accounts. ACH transfers can be grouped between the two banks, and all transactions are held and checked before bulk processing. There are two ACH transfer types: ACH direct deposit and ACH direct payments.


PayPal has become a top alternative for companies that hire freelancers and contractors. Whether you employ one-time, seasonal, or part-time workers, PayPal can eliminate the need for paper checks and pay cards.

Contractors can even invoice you directly through PayPal to help keep your books accurate. When sending a payment, check the Service box. This option will correctly categorize this payment, apply appropriate fees, and provide an instant payment option for the freelancer. 

Mobile wallet

As the number of smartphone users continues to rise, so does the access to mobile payments. According to estimates from eMarketer, over 100 million consumers used mobile payments in 2021.

Fueled by the pandemic, Americans are adopting contactless payments as the new norm. As more and more banks focus on a digital footprint, employees can upgrade their traditional direct deposit for instant pay through Cash App, Venmo, PayPal, Apple Pay, Google Pay and Zelle. [Read related article: Mobile Wallet Guide: Google Pay vs. Apple Pay vs. Samsung Pay]

Paper checks

With all of the digital options available, it may surprise you that the paper check is still widely used among small and midsize businesses. These companies lack payroll software and view paper checks as a trusted payment method. 


Cash is a legal way to pay your employees; however, it’s not the generally preferred way for several reasons. Although you may save on fees, paying cash is tedious, as you will need to track accounting for your business manually. This can lead to human error, IRS audits and disgruntled employees. It also requires frequent trips to the bank to handle cash shortages and exact change. Once all of the worker paychecks are figured, you will have to deliver each one by hand. 

TipBottom line

With all of the time spent calculating payroll and fixing mistakes when paying employees with cash, you would be better served by looking into a low-cost payroll system.

Payroll card FAQs

Is a payroll card a debit card?

Essentially, yes. They function in the same manner. A financial institution will hold the deposited money in an individual account, and the payroll card provides access to the money much like a debit card. Alerts can be set up to notify the account owner of low balances, or when funds become available after a deposit. Also, payroll cards tend to be affiliated with one of the major credit card issuers – such as Visa, MasterCard or American Express.

Can employers only offer payroll cards as a payment method?

No. Despite the growing popularity of payroll cards, federal banking laws require businesses to offer employees at least one additional payment option. Payroll cards generally cost a business $7 per month per employee, whereas paper checks can cost $23 per month per employee. Given the high cost of paper checks, direct deposit is usually the second option. That is not to suggest that employers must only offer two forms of payment. Each state retains the right to regulate the specific methods of payment offered to employees.

Where can employees use payroll cards?

Payroll cards are generally accepted anywhere that you would typically use a standard bank account debit card. They hold the same buying power as bank cards and can be used at stores, gas pumps, and even ATMs. Cash can be taken out of the account at ATMs, or by using a cash-back option at grocery or retail stores. Payroll cards can also be used to make payments online, on any sites that would accept the same brand of debit card.

Can you deposit money on a payroll card?

The ability to deposit money on a payroll card depends on the services the provider offers. Some cards offer the option to add money at a money exchange center or ATM, while some do not. Review your provider’s terms to see if this option is available.

Is direct deposit or a payroll card better?

Determining whether a direct deposit or payroll card is better for your business greatly depends on your situation and preferences. If most of your employees do not have a bank account, it may be easier – and cheaper – to use payroll cards.

Payroll card fees can add up. Some cards have very few associated fees, while other cards charge a fee for normal monthly use, like withdrawing funds from an ATM. Also, not every card offers the option to deposit non-payroll money onto it.

Bottom line on payroll cards

Payroll cards are an ideal option if you’re looking to save money on processing payroll. They are also a vital tool for employees who don’t have bank accounts. 

Most of the large payroll processing companies offer small businesses a payroll card option. Additionally, a host of third-party companies can provide independent services, should your organization process payroll manually or work with a partner that doesn’t offer payroll card services.

Payroll cards can be a great way to securely compensate your employees while saving money on direct deposit fees and paper check overhead. However, you should be aware of the fees and conditions associated with payroll cards. You should also offer a payroll card that provides an online portal or mobile app.

There are several pros and cons of using payroll cards. However, the best option for your business depends on your workers, your company’s needs and the overall cost.

Matt D’Angelo contributed to the writing and research in this article.

Julie Thompson
Contributing Writer at
Julie Thompson is a professional content writer who has worked with a diverse group of professional clients, including online agencies, tech startups and global entrepreneurs. Julie has also written articles covering current business trends, compliance, and finance.
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