Why Your Employer Really Wants To Pay You With A Prepaid Debit Card
Businesses, particularly ones with hourly workers, absolutely love these cards. They're a big money-saver for companies, helping them
Banks love them, too. Prepaid cards aren't subject to the same regulations as normal debit cards, so banks can charge a variety of fees they might not be able to otherwise.
The result is that workers end up paying a variety of expensive, poorly disclosed, and difficult-to-avoid fees, ranging from charges for using the card infrequently, for balance inquiries, and for using out-of-network ATMs.
Here's a list of fees from The New York Times, for NetSpend, the largest issuer of these cards:
"On some of its payroll cards, NetSpend charges $2.25 for out-of-network A.T.M. withdrawals, 50 cents for balance inquiries via a representative, 50 cents for a purchase using the card, $5 for statement reprints, $10 to close an account, $25 for a balance-protection program and $7.50 after 60 days of inactivity."
With such fees, it's no wonder that issuers are inclined to offer savings and favorable contracts to get employers to use these cards.
The law states that companies can't force employees to use these cards. But they can still automatically enroll workers without advertising that there are other options available, and make them jump through hoops to get a check instead.
According to consulting firm the Aite Group, and cited in The Wall Street Journal, the use of these cards has rapidly increased from 3.1 million cards active in 2010 to 5.8 million today. That figure is expected to nearly double to 10.8 million in 2017, when employers are projected to load $68.9 billion on these cards.
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