Fees nibble at income of those paid with plastic

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On paper, it couldn't be more convenient: Instead of a check every two weeks, your employer hands you a debit card, depositing your pay automatically and freeing you to spend it immediately.

But then there are the fees: $1.50 to withdraw cash, another $2.50 if you do it from a non-company ATM, the $2 monthly account fee. For workers making low wages, those fees can eat up a sizable portion of their income, a fact that has sparked lawsuits in Pennsylvania and elsewhere.

With one of the nation's largest banks headquartered here and a slew of local public employers already signed up for similar programs, what role will Pittsburgh play in the payroll debate?

"It really is consistent with best business practices of going as paperless as possible," said Brad Korinski, chief counsel at the Allegheny County controller's office. "On the consumer end of things, the debit cards provide immediate and guaranteed access to funds. You're not waiting for the post office to get it to you."

In many ways, paycards are identical to the debit card you may already have in your wallet. They're sponsored by a bank and usually backed up by Visa or MasterCard, meaning they can be used anywhere a credit card is accepted.

But they come with fees you'd never see on a checking account statement, including a charge just to withdraw money from an ATM -- even if it's owned by the bank sponsoring the paycard. And when a worker is already making minimum wage, opponents argue, charging those kinds of penalties makes them even poorer.

Last month, a Luzerne County woman sued a local McDonald's franchise after she said her boss forced her to sign up for a JPMorgan Chase payroll card that would have charged her $1.50 every time she went to the ATM.

When she asked to sign up for a direct deposit, her supervisor said no "we only pay on the card," she said, according to the lawsuit.

Here in Pittsburgh, PNC Financial Services markets "Paycard Express," a program that has already been picked up by Allegheny County and Pittsburgh Public Schools. Executives tout as the more convenient alternative to hard currency.

"It gives you extra security. You don't have to carry cash," said PNC spokesman Fred Solomon. "It provides a number of important benefits -- and it has benefits to the organizations offering this."

Employers have led the charge for payroll debit cards, eager to shed the expense of mailing paper checks or performing direct deposits. The cost of issuing a check runs between $2 and $5, depending on the institution.

But at PNC, like JPMorgan Chase, the costs are shifted to the customer's end. PNC charges $1.50 for each cash withdrawal, though it grants customers one freebie per pay period, and also levies a $2 monthly maintenance fee.

Mr. Solomon said these charges cover the expense of maintaining the account.

PNC officials wouldn't disclose how many payroll card accounts they've opened since the program debuted. Analysts say the Pittsburgh company is only a bit player nationally, with Charlotte-based Bank of America leading the way.

But PNC has attracted clients locally, including Allegheny County, which will soon distribute all payments to foster parents via payroll debit cards. The county's Department of Human Services has already completed a test run with the Senior Helpers program, which sends adults to help senior citizens with household chores.

The county estimates it will save $40,000 a year in personnel and postage costs by paying foster parents through debit cards.

"To a large degree, this debit card is as good as cash in almost any circumstance you can think of," said Mr. Korinski, the chief counsel in the controller's office. "And I think the recipients like to know that on a certain date, they're going to have the money."

Then again, they don't have a choice. Mr. Korinski said the county doesn't plan to offer an alternative, including direct deposit. They may reconsider if people complain, he said.

One way or another, the payroll card is here to stay. According to the Aite Group, a Boston-based research firm, there were 4.6 million active payroll cards containing a combined $34.1 billion in 2012; that amount is expected to grow to $68.9 billion in 2017.

Aite Group senior analyst Madeline Aufseeser acknowledges the bad press payroll cards have gotten following the McDonald's lawsuit, but says the industry has been "completely maligned."

Sure, low-wage employees are paying fees, she said, but they paid more before when they had to cash their paycheck at a storefront that would charge them 3 percent of their earnings. "Do you want to go back to that?" she asks.

"It's a much better opportunity to have a payroll card than to receive a paper check and have to pay someone to cash it," she said.

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Andrew McGill: amcgill@post-gazette.com or 412-263-1497.


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