Wage cut: Paycard fees hurt low-paid workers

Share with others:


Print Email Read Later

You must spend money to make money. That axiom may be true, but it doesn't follow that you must spend money to get the money you already made.

Yet that's what is happening as an increasing number of employers change their payroll systems to issue prepaid cards -- they're like debit cards -- instead of traditional paychecks or direct deposits to workers' bank accounts.

The argument in favor of the paycards is obvious for employers; they're cheaper to issue. There's an argument that the cards are advantageous for workers, too; funds become available on payday without the delay of waiting for and cashing a check.

But there is a big drawback with the cards, one that hits America's lowest-paid workers the hardest at some of the nation's largest employers, including Wal-Mart. Most of the cards charge the customers -- the workers -- a fee to get their money from an ATM. That's not right.

A charge of $1.50 per withdrawal, for example, may not seem like a lot, but those fees can add up, especially if there are other costs such as monthly charges for statements, card replacement, inactivity or using a bank other than the one that issued the card. An employee at a McDonald's in Milwaukee told The New York Times that he spends $40 to $50 a month on fees associated with his pay, and he earns only $7.25 an hour. That's a sizable chunk of his income. While proponents of the cards argue that they still are cheaper than using check-cashing services, which typically charge at least a 3 percent fee, his experience refutes that.

Government agencies also are starting to introduce the plastic payment method. For example, Allegheny County is planning to use the cards to issue payments to foster parents. That's the wrong way to go. State and local governments should be trying to protect workers and consumers from exploitation, not using the service just because they can save a few bucks on payroll processing.

When it comes to employee compensation, the paycards might even be illegal in Pennsylvania. According to the state Department of Labor and Industry, depending on the details of each card program, fees may constitute invalid deductions from employee wages, which are prohibited under the state's Wage Payment and Collection Law. New York's attorney general has started an inquiry into the practice.

There's nothing wrong with paying employees with debit cards, as long as there are no charges associated with using them. Workers are entitled to receive full payment of their wages.

With the use of paycards growing, regulations are needed to protect consumers and prevent gouging workers who are just trying to collect what they're owed for their labors.

opinion_editorials


Advertisement
Advertisement
Advertisement

You have 2 remaining free articles this month

Try unlimited digital access

If you are an existing subscriber,
link your account for free access. Start here

You’ve reached the limit of free articles this month.

To continue unlimited reading

If you are an existing subscriber,
link your account for free access. Start here