Imagine you get a new job, work hard, and look forward to pay day, only to discover that you won't actually get a paycheck. Instead, your employer has decided to give you a prepaid debit card, which has your compensation on it.
Why might this be a problem? Because it puts you in a position in which you actually have to pay money to receive your own money.
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their wages, they must first pay a fee.For these largely hourly workers, paper paychecks and even direct deposit have been replaced by prepaid cards issued by their employers.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.
For many middle- and upper-class workers -- who tend to receive checks or are compensated through direct deposit -- banks waive fees so long as you have a certain minimum balance. But for those who are struggling to get by, and rely on every penny from hourly wages, this effectively serves a penalty for being part of the working poor.
The NYT talked to a young woman who works at a Taco Bell in St. Louis who said simply, "It costs too much to get my money."
My first instinct was to question how this is legal, but it is. Indeed, the payroll-card market is hardly regulated at all.
Worse, it's becoming increasingly common for workers at fast-food chains, drug-store chains, restaurants, retail positions in shopping malls, and Wal-Mart.
The corporations find it cheaper and easier to use the cards rather than print/mail checks or deposit compensation directly, and while some employers offer workers a choice, employees are strongly encouraged to take the cards (burdensome paperwork is required for the alternatives). The New York Times report noted a calculator on Visa's site estimates that a company with 500 workers could save $21,000 a year by switching from checks to payroll cards, so many are doing exactly that.
I'd love to see Congress take up an issue like this, but given lawmakers' inability to tackle the basics, consumer protections in areas like these are probably many years away.